Despite the fact the Catalan and Spanish economies have 20 consecutive quarters of growth, the recovery is still very scarce in the cement industry and, in general, in the construction sector as a whole. Josep Ramon Fontana, Head of the Markets Department of the Institute of Construction Technology of Catalonia (ITeC), believes that in addition to the excesses committed during the turn of the century bubble, the crisis “has left the sector very weakened in terms of reputation”. Scandals such as those of the radial highways of Madrid or the construction of AVE lines in territories without demand have caused that “no political program now talks about Construction, it has become a taboo subject”. This has generated the paradox that “while in the civilized world the creation of infrastructure is related to economic progress, not here” says Fontana, who recalls how public accounts have been squared based on reducing investment in public works, based on the premise that “punishing the construction sector has become socially acceptable”.
For ITeC, short-term expectations only show discrete signs of improvement. During the last months it has been the investment on the part of the city councils that has sustained the bidding for public works. “But in the spring of 2019, with the holding of the municipal elections, the engine that has been the lifeline of the sector for the last 4 semesters will have stopped”, he states. The only hope is that the will expressed by the Spanish and Catalan governments will generate an increase in tenders, although the execution of these projects could be delayed due to the economic situation and the possible convocation of elections. Fontana also recalls that “political investment wills are conditioned by budgetary availability monitored from Brussels” but is emphatic when affirming that current governments have more social pressure to invest in pensions, education or health than “in the construction of infrastructures, that is not precisely their priority”.
Fontana says that “Construction is the regulating valve of budgets” of public administrations, since “they can ‘unplug it’ without the country protesting”. This would explain, for example, the persistent phenomenon of the difference between bids and public works executions: governments can adjust their accounts by stopping work in progress, arguing that there are technical or administrative problems. And he cites the case of ADIF, which has such high levels of litigation in its infrastructure projects that it even allocates a specific item to its budgets.
The lack of investment in public works has led to the consumption of cement is practically the same as a year ago, and that is part of very low levels after the fall of 80% of the market in the period 2008-2014. How can this situation be reversed if no increase in the bidding of new infrastructures is foreseen? According to Fontana, a possible solution could be the dumping of public resources to existing infrastructure maintenance projects. And he explains that “mature markets are nourished by maintenance, both in civil engineering and in building, on a European scale, 45% of civil engineering production comes from maintenance, while in Spain it does not even reach 30%”.
For the residential market, the number of housing visas in Spain in 2017 was around 80,000, far from the 865,000 visas for the peak of the bubble in 2006. There is a lot of ground to recover, but Fontana does not trust that the advances will be very significant, given that “the foreseeable rise in mortgage interest rates can pave and stabilize the growth of this sector, placing it around 100,000 homes / year”. It will be necessary to see if the so-called speculative reversals, which have become “a significant component of the demand for housing in the country”, continue or not interested in this type of asset, warning that it could happen as cryptocurrencies, which apparently have lost a lot of money its initial appeal.
Regarding the medium-term future, the ITeC representative believes that it would be ideal “to reach a stable and predictable market, subject neither to political-electoral fluctuations nor to the preferences of speculative investors”. In this sense, he considers that “rehabilitation and maintenance will be business opportunities and will help to cushion economic cycles, as occurs in the large markets of the rest of Europe”. And he concludes by putting figures to the recovery of the construction sector: “right now represents 8.6% of the country’s GDP, when the European average is almost 10%. We must recover at least this size of market, and then aspire to maintain it in the long term, this would give us the sectoral stability that we envy of Belgians, Swiss or Danes”.