A global surge in renovating and home improvements is driving demand for building products and could well have a long way to go.
How long can it last?
That’s the question facing building products groups BlueScope Steel and Reliance Worldwide, which reported strong profit growth on Monday thanks to a global residential construction boom that started in the renovation and remodelling market and is now moving to new home building.
Just 10 months ago, as the first wave of COVID-19 hit and much of the world went into lockdown, many building companies prepared for the worst.
New Zealand’s Fletcher Building tipped already tepid Australian housing approvals would fall 15 per cent and made 1500 staff redundant, including 500 in Australia, while Reliance, which makes plumbing supplies, was conserving cash by delaying some longer-range capital works programs.
But then things went nuts.
Speaking from his home base in the US city of Atlanta on Monday, Reliance CEO Heath Sharp says demand in the US market surged 20 per cent almost overnight in March 2020 as cocooning consumers fixed existing plumbing problems and made improvements to homes they were suddenly spending more time in.
In Britain, lockdown saw demand dive. But the end of the first wave brought a surge in pent-up demand from delayed repairs, and then a new wave of demand from renovations, which has continued; plumbers and construction workers have kept going through the current lockdown.
Australia has seen the same conditions, with the extra wrinkle of strong demand for new homes thanks to federal and state government building incentives.
Reliance reported a 56 per cent jump in underlying profit to $99.3 million for the December half, with US earnings up 49 per cent, European earnings up 22 per cent and Australian earnings up 31 per cent.
BlueScope saw Australian steel products earnings rise 15.6 per cent, as steel dispatches in Australia hit their highest point in 11 years – and Australia still had a car industry that used lots of steel.
BlueScope boss Mark Vassella is wary of looking too far ahead, but sees good momentum from a shift in customer preferences towards single dwellings and living in regional areas.
“Our customers, our builders, are largely telling us they’ve got strong order books through calendar 2021, so it will be interesting to see where this ends,” he says.
Sharp isn’t seeing any slowdowns yet either. And while things may change when international travel resumes, a new normal of working more at home should mean renovating and repairs hold up as plumbing is used more frequently.
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