Energy shock set to push building material prices higher

Many sectors will be impacted by the current surge in energy prices caused by the conflict in the Middle East. As noted previously, producers of building materials such as cement, concrete and bricks rely heavily on energy. If energy prices remain high, these manufacturers are likely to pass increased costs on to construction companies, which will put pressure on profit margins and lead to higher overall building costs. This, in turn, could result in reduced production volumes.

Early indications point to rising building material costs. In March, a net 18% of EU building materials suppliers anticipated increasing their sales prices over the next three months. This figure represents the highest percentage observed in three years since the energy crisis of 2022. Yet, the number doesn’t come close to the levels of the energy crisis in 2022.

Heating sources differ among producers across European countries. For example, gas is commonly used in the building material sector in the Netherlands and Spain. In contrast, producers in Poland and Germany depend more on coal, wood, natural energy inputs and energy residuals. This makes building material producers in the Netherlands and Spain relatively vulnerable to the current price increases in gas. Dutch producers are also reporting the strongest expected increase in output prices.

In the period 2010-2020, the amount of oil as a heating source has decreased substantially in the sector, although it hasn’t witnessed a further decrease in the last five years. Between 2020-2025, companies mainly phased out the use of coal, while the relative amount of used gas has remained more or less the same for the last 15 years. Building material companies have become more sustainable due to the reduced reliance on coal, but the dependency on oil and gas hasn’t really decreased. The higher energy costs are therefore still a burden to the industry.

Within Europe, the UK and Swedish building material producers stand out for having made strides in lowering their energy intensity. The UK, in particular, has taken major steps by phasing out oil and coal from production. For instance, UK Hanson Cement (part of HeidelbergCement) has sharply reduced coal use at its Ribblesdale plant and replaced it with biomass and waste‑derived fuel. In Sweden, reductions in energy intensity have been more evenly spread across coal, gas, and oil inputs.

The European building materials sector still faces significant challenges from higher energy costs and new market uncertainty. While the reliance on oil and coal has decreased in the last two decades, the dependency on gas has remained more or less the same. In addition, the dependency on oil hasn’t decreased since 2020.

The recent uptick in building permits offers a glimmer of hope for stronger demand, but a sustained recovery will depend on greater stability in energy markets and continued innovation in sustainable production methods. Without this, rising production costs risk pushing sales prices higher which, in turn, would weigh on demand. A firm commitment to greener, less energy‑intensive production processes will therefore be essential for long‑term resilience.