Demand for bricks has plummeted, brickmakers are discounting

Prague - The demand for bricks has significantly fallen on the domestic market during this year. Brick manufacturers are reducing prices by up to 40 percent; some even have to sell below cost. However, the prices of electricity, gas, and other inputs continue to rise, in some cases by as much as 20 percent. Experts do not rule out that some brick factories will have to further limit production or even close down. This was discovered by ČTK among the main domestic brick manufacturers at the construction fair For Arch, which started today.
    The primary cause of the drop in demand is attributed by brick manufacturers to the crisis in global markets and the strong koruna. The strong domestic currency has led to the price of bricks imported, for example from Germany, reportedly being dozens of percent lower than for construction materials produced domestically this year.
    "The year-on-year price reduction for certain products is up to 40 percent in extreme cases,” said Jan Krampl, the commercial director of Heluz. According to other manufacturers, however, discounts in the market could currently be even higher. "It is not a problem to get the price down to 50 to 60 percent,” stated a representative from another leading brick company. Some manufacturers allegedly have to sell even below cost.
    "The issue is not production, but sales,” said Karel Pavlík from the Silicate Union of the Czech Republic, which groups manufacturers of bricks and ceramics among others.
    The result of this situation is that some brick companies have already allegedly had to stop the operation of their production lines. "If a company does not have a certain size, it is no longer feasible to operate under the current prices, exchange rates, and costs,” Krampl pointed out. "This means they must close production due to the excessively low market price,” he added.
    One of the first domestic victims of the market situation is the production of bricks by the Austrian brick giant Wienerberger in Lety near Písek. The concern will cease production in Lety. It also has similar plans for another 25 brick factories in other countries. The collapse of the construction market in Britain and the USA has reduced the company's profit by almost a fifth in the second quarter.
    There has been a significant drop in demand in Central Europe as well, including Poland, which was, according to Krampl, the engine of brick sales in the region last year. Germany is reportedly also doing poorly, while the best brick sales this year are in Slovakia.
    Declining demand alongside rising energy prices is troubling other manufacturers of construction materials as well. "In general, there has been a certain decline,” said Milan Skružný from Stomix, a company that produces insulation systems among other products. He attributed the decline to the slowdown in residential construction and also to this year's lack of funds in the Panel program budget of the State Housing Development Fund, which finances repairs of panel houses.
    The international rating agency Moody's downgraded the ratings of European construction material manufacturers at the end of August. This move was justified by deteriorating economic conditions and a slowdown in construction due to the crisis in global markets. The decline in the production of construction materials in Europe is said to have caused a drop in residential construction in the USA, Spain, Ireland, and the UK.