Last week, the European Central Bank (ECB) cut the key interest rate from 4.5% to 4.25%. But what does this mean for the German housing industry and especially for the mineral building materials industry?
I have been working in the construction industry since I joined Hochtief in 1995, so I have been working for almost 30 years now. In 2007 I founded FaMAS, and since then we have been in regular contact with the most important companies in the mineral building materials industry in the DACH region. We spoke personally with over 2000 executives from more than 500 companies, including industry giants such as Heidelberg Materials, Cemex, Holcim, CRH and many more. Our focus is on M&A strategies as well as the market assessment of market participants.
Interestingly, the decline in residential construction is not the top priority for everyone. The reports on the housing crisis, which are often dramatized in the media, are not reflected in the management floors of the companies. On the one hand, this is due to the fact that the mineral building materials industry does not depend exclusively on private residential construction in Germany. At Heidelberg Materials, for example, this only accounts for about 20% of sales in certain regions. On the other hand, many of these companies are based in the DACH region, but generate the majority of their business abroad. For example, Holcim, based in Switzerland, generates over 50% of its sales outside Europe and has recently decided to separate the North American business unit from the rest of the company in order to promote its dynamic development.
German residential construction is therefore of comparatively little economic importance for the mineral building materials industry. More important is the issue of CO2 reduction. This priority is also reflected in the recent acquisitions of Heidelberg Materials, which has acquired three building materials recycling companies in Europe, including two in Germany: SER Group in Heilbronn and RWG Holding in Berlin.
Many medium-sized companies in the DACH region have not yet fully recognized this new focus, although it has been emerging for several years. The circular economy permeates many areas of large corporations and market participants throughout Europe. Discussions with companies outside the DACH region, such as CEMEX and CRH, also confirm this trend, even if it does not have the same meaning for everyone.
In summary: In our opinion, the ECB’s interest rate cut will not have a major or immediate impact on the German mineral building materials industry. The increase in the share prices of Holcim and Heidelberg Materials last week is therefore unlikely to have been influenced by the ECB decision.
