Aggregates Prices Explained

Aggregates prices posted modest trends as macroeconomic uncertainty continued to overshadow the improvement of commodities sales. 

While most segmented markets registered increased sales due to seasonal demand from key construction materials, inflation and the Federal Reserve’s decision to implement once or twice rate cuts yearly means a relatively tight monetary policy stance. 

This made countries and stakeholders cautious in borrowing money. Additionally, the unsettled property development crisis in China impacted its sales gap in the market as the country contributed 20% of the global construction investment.

However, experts are hopeful for a rebound as the market noticed an uptick in demand from public construction. The aging public infrastructure in North America and Europe translated to government-funded projects, boosting aggregates prices in the regions.

Why are aggregates prices fluctuating?

1. Urbanization

The growing population in booming cities created transportation issues across highway and public transit systems. This prompted the government to spend on smart cities to reduce traffic brought about by population growth. This includes infrastructure development and renovation of roads and bridges to streamline transportation.

For instance, India plans to build more than 100 smart cities all over the country to achieve rapid urbanization and lessen the influx of people in Mumbai. This huge government-funded project will propel the demand for construction aggregates and their prices.

2. Tunnel Construction

It is estimated that there will be a two billion increase in the global population in 2040 and 46% of that growth comes from urban areas. As a result, there will be an enormous need for commercial buildings, subways, and tunnels for mobility.

Tunnel construction requires aggregates and other building materials. This innovation is considered more sustainable than highways. It has a lower environmental impact during construction as it requires less land clearing. Along with this, water, gas, electricity, and trade becomes easier.

For example, the world’s longest tunnel in China that traverses between the country’s Xinjiang Uygur autonomous region and Central Asia opens new opportunities for transportation connectivity and foreign trade.

3. Fed Rates Cuts

While inflation measures eased, the high price of goods and services across countries continues to pose a burden on individuals, businesses, and policymakers.

This encourages state banks to implement tight monetary policies. With the benchmark interest rate of 5.25%-5.50%, financing costs for infrastructure projects remained elevated. This slows down new construction and creates a cautious economic environment, affecting the demand for aggregates.

4. Input Price Fluctuation

Aggregates production extensively uses electricity, diesel fuel, liquid asphalt, and other petroleum-based resources. These materials are mostly sourced from critical countries involved in geographical tensions.

Additionally, logistical challenges brought by the long-standing tension in the Middle East, the shortage of skilled laborers, and the rising wage cost influenced the commodity’s manufacturing costs.

Which variables impact the price of aggregates?

• Urbanization
• Tunnel Construction
• Fed Rate Cuts
• Input Price Fluctuation
• Infrastructure Renovation

Where do aggregates come from?

The production process of aggregates begins with extraction, where raw materials like sand, gravel, and crushed stone are sourced from quarries, riverbeds, or pits. Then, the materials are crushed using jaw and cone crushers to break them down into smaller pieces.

After crushing, the aggregates undergo screening to separate particles by size, ensuring uniformity. Washing follows to remove impurities and the aggregates are stockpiled and delivered to construction sites.

Aggregates are grouped according to types, including fine aggregates (sand) and coarse aggregates (gravel and crushed stone).

Other types include slag (a byproduct of steel production) and recycled concrete (repurposed from demolished structures). The United States, China, India, Russia, and Germany are the top producers of this commodity.

What are the uses of aggregates?

Here are the top applications of aggregates and their extensive uses:

1. Construction – Aggregates are fundamental in construction projects, providing the backbone for concrete and asphalt. They form the base layer for foundations, ensuring stability and load distribution. High-quality aggregates enhance the strength and durability of buildings, roads, and bridges, making them resistant to environmental conditions.

2. Road Construction – They are crucial for road construction, forming the base and sub-base layers that provide stability and support. Also, they help spread out the weight of traffic evenly, preventing deformation and extending the road’s lifespan. When mixed with bitumen in asphalt, aggregates create a smooth surface that can handle heavy traffic and harsh weather conditions.

3. Concrete Production – Aggregates make up about 60%-75% of the mix. They provide bulk and strength, improving the durability, workability, and thermal concrete properties. The size and type of aggregates used significantly influence the concrete’s performance, making it ideal for constructing buildings, bridges, pavements, and infrastructure projects.

4. Landscaping – They are used for pathways, driveways, and garden beds, providing a clean and chic look. Additionally, aggregates improve drainage around plants, preventing water buildup and promoting healthy growth.

5. Railways – Aggregates (particularly crushed stone) are used as railway ballast to hold the wooden cross ties in place and ensure the safety and stability of the tracks. They withstand force and provide a solid foundation, contributing to the longevity and reliability of railway systems.

What is the future price of aggregates?

Driven by urbanization and infrastructure development, the global construction aggregates hold the biggest market value of the market. It is projected to grow at a CAGR of over 6.2% in 2032.

However, economic instability due to inflation, rising interest rates, and geopolitical tensions slowed construction projects, reducing aggregates demand. The once-booming Chinese real estate market (which used to be a major consumer of aggregates) saw a sharp decline in housing starts and sales.

This has led to a declining demand as fewer new projects are initiated. However, urbanization projects and government initiatives that boost affordable housing are helping to mitigate some of the decline.

On the other hand, developing countries are experiencing a surge in construction demand, propelling the aggregates market. Rapid urbanization and infrastructure development in countries like India, Brazil, and Indonesia drive the need for construction materials.

This increased demand offset some of the losses from more economically stable regions. Additionally, the recycling of aggregates plays a crucial role in supporting the market.

The United States and Germany promote recycled aggregates to curb carbon footprint. LafargeHolcim and Heidelberg Materials invest in recycling technologies to reduce waste and lower production costs. This approach conserves natural resources and contributes to a more sustainable construction industry.

Overall, experts predicted a profitable market in the coming years as rising investments in the construction sector will largely contribute to its growth. Thus, its price will be around $434 – $456 per ton in 2030.