Constr., Infra & Materials (AO) | The Week in Building Materials: Looking into our Q2 crystal ball...

Research evidence excerpt

Constr., Infra & Materials (AO) | The Week in Building Materials: Looking into our Q2 crystal ball...

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weakness in the construction market brought on by high interest rates, inflation, and adverse net operating conditions. Ed

Sullivan highlights that the Iran conflict introduces new uncertainty into the 2026 outlook. For a construction outlook already

dependent on declining long-term rates, the risks are significant. At this time, no one knows the scope of the conflict and its

resulting impact on interest rates, inflation, and economic activity. To this end, the Sullivan Report offers three scenarios that

differ depending on the length of the conflict and blockage of shipping through the Strait of Hormuz. In each scenario, the conflict

in Iran heightens the probability that inflation and overall economic conditions will worsen. The Federal Reserve will likely adopt

a wait-and-see approach toward future rate cuts. No improvement in interest rates or inflation is expected anytime soon. The

article says that the conditions necessary to bring about a recovery in construction activity will be delayed by the Iran conflict,

adding that a construction recovery that was expected to begin in the second half of the year now seems less likely. Ed Sullivan

concludes that the potential of a fourth year of decline in cement consumption is now on the table for consideration.

Key takeaways from the Q1 2025 reporting season. The heavy-side building materials manufacturers posted a subdued organic

top-line performance in the seasonally least relevant quarter of the year, on account of the impact on developed market

operations of adverse weather and the leap-year effect. However, given that consensus was conservatively positioned for this