Aggregates price index

Over the five-year period through 2024-25, the UK API is forecast to increase at a compound annual rate of 8.1%, to reach 159.5 points. In absolute terms, over the aforementioned time period, the UK API is estimated to change by +51.5 points. As per the August 2021 publication of the Aggregate Minerals Survey for England and Wales, prepared by the BGS for the MHCLG and the Welsh Government, and which provides comprehensive data for monitoring and facilitating aggregates provision up to national level, total sales of primary aggregates – land-won and marine sand and gravel, and crushed rock – produced in England and Wales and not including imports, were 148.1 megatonnes (Mt) in 2019, up 8.1% compared to 2014 (137.0 Mt). Meanwhile, total recorded apparent consumption of primary aggregates domestically stood at 149.8 Mt in 2019, to which BSG and MHCLG state approximately 3.3 Mt of 'unallocated sales of unknown destination' should be added to give 153.2 Mt. Compared with 2014 (140.1 Mt), total consumption, including 'unallocated sales of unknown destination, was up 9.4% in 2019. With regards to total permitted reserves for aggregate use in active and inactive sites in England and Wales, reserves at the end of 2019 were 4,157 Mt, an apparent 6.4% increase on 2014 (3,906 Mt).

As per the BGS' Aggregate Minerals Survey for England and Wales, of total aggregate sales in 2019, 31% were used as concreting aggregate; 25% as roadstone - coated as asphalt and uncoated -; 22% were used as other screened and graded aggregates; and 17% for other construction uses, including fill - the remainder (5%) was split between building and or asphalting sand, railway ballast, and armourstone. Accordingly, entities in construction and related-markets are the predominant users of aggregate materials; therefore, the rate of downstream demand from lead contractors, developers and other agents responsible for procurement on construction projects, relative to the availability of aggregate materials throughout the supply chain, dictate the magnitude, direction and rate of change in the API. Throughout the past five-year period, a sustained year-on-year increase in the API has in large part been the product of demand-pull inflation; that is, demand for aggregate materials has outpaced supply. Combined with a post-referendum devaluation in the trade-weighted value of the pound sterling, whereby currency market turmoil induced exchange rate-driven input price inflation, a high level of construction activity in the UK market in the years leading up to the pandemic, relative to historical levels, translated into greater demand for input materials (e.g., aggregates). With the rate of growth in aggregate reserves – an effective proxy for domestic supply – unable to keep abreast of that of aggregates sales and consumption (i.e., demand), as per BGS data, lead times for aggregates in construction market supply chains lengthened, keeping upwards pressure on the API.

In 2021-22, the API rose by 1.5% year-on-year – or increased by +1.8 points in absolute terms – and rise to its highest financial year-average since comparable records began in 1996-97. Upon the onset of the COVID-19 (coronavirus) pandemic, and amid consequent public health restriction mandated by government, supply chains disruption ensued, whereby reduced capacity in industrial production markets limited the availability of materials and other inputs among suppliers. Meanwhile, disruption to the flow of trade and limited access to regular supply lines, by way of travel bans and import-export restrictions, further constrained the inventory of construction materials. While industrial and, in particular, construction activity effectively froze during the Spring 2020 lockdown, with the government mandating all non-essential on-site works pause while firms implement necessary operating procedures as per Construction Leadership Council (CLC) guidance, and while many projects were delayed, postponed or otherwise cancelled, as stakeholders assessed the feasibility to continue from a financial and operational perspective during the pandemic, the fact critical construction works were permitted to continue, in addition to the release of pent-up demand in construction beyond Q2 (April-June) 2020, meant underlying construction activity remained relatively high over the course of the 2020-21 fiscal year heading into 2021-22. Ultimately, a combination of persistently high demand for construction material inputs and restricted supply inflated the price of aggregates. Epitomising extended lead times throughout the supply chain, the CLC announced in its April 2021 Construction Product Availability Statement that aggregates were added to a growing list of items in short supply in the United Kingdom – 'demand for construction products remained high both in the UK and globally.

On the morning of 24 February 2022, President Vladimir Putin announced that Russia was initiating a "special military operation" in the Donbas region, and proceeded to launch a full-scale invasion into Ukraine. This then led to various economic and diplomatic sanctions from Western countries, including the UK, towards Russia. These sanctions have been met with threats from Russia and orders my President Putin to place Russian nuclear deterrent forces on high alert. While the long-term global and domestic economic outcome of the Russian-Ukrainian war is uncertain at this stage, it is evident that this has been an influential factor towards aggregates price index. This is because of the response to Russia's actions, whereby energy giants such as Shell, BP and Exxon have pulled out of Russian energy deals, while the many Western countries have announced a ban on importing Russian oil and other petroleum products, which has significantly disrupted the supply chains across the globe. In addition to this, higher prices oil prices as a direct result of Russia's invasion of Ukraine have been compounded by strong consumer demand across the globe as the world has attempted to recover from the pandemic and weak supply as the leading oil-producing nations throttle output. As a result, the globe has endured significant supply chain disruptions and surging energy prices (inclusive of oil). All of which is projected to compound and lead to rising prices for aggregates within the UK. Overall, the UK API is forecast to accelerate by 48.9% - +61.4 points in absolute terms – in 2022-23 alone, reaching an estimated 187 points.