|

Energy: Price shock drives building material costs – ING

ING’s Maurice van Sante argues that higher Oil and Gas prices, driven by conflict in the Middle East, are set to raise costs in the European building materials sector. He notes that producers’ exposure to Oil and Gas is similar to 2022, so elevated energy prices are likely to be passed through, pressuring margins and construction activity.

Energy-driven cost pressures in materials

"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."

"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 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."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

AUD/USD eases from one-month high; holds above 0.7000 amid softer USD

AUD/USD pulls back slightly after hitting a fresh one-month high in the Asian session on Monday as bulls turn cautious ahead of the latest Australian consumer inflation figures and the crucial FOMC decision later this week. Meanwhile, expectations of another RBA rate hike in November support the Aussie. Moreover, a softer US Dollar helps the currency pair hold above the 0.7000 psychological mark.

USD/JPY extends recovery from one-month low beyond 157.00

USD/JPY kicks off the week on a positive note, building on Friday's modest bounce from the 156.00 neighborhood, or a one-month low amid some repositioning ahead of key central bank events and data risks. The Fed and the BoJ will announce their policy decisions on Wednesday and Friday, respectively. This, along with the release of Advance US Q3 GDP and the PCE Price Index on Thursday, should provide some meaningful impetus to the currency pair.

Gold struggles below $4,000 as oil-driven inflation fears reaffirm Fed hike bets

Gold attracts follow-through selling at the start of the new week, trading below $4,000 during the Asian session and near a three-month low. Higher energy prices continue to fuel inflation fears and reinforce US rate-hike expectations, undermining the non-yielding bullion. Bears, however, might refrain from placing aggressive bets ahead of the crucial FOMC meeting and other key central bank events this week.

Week ahead: Central bank and earnings bonanza could roil markets

After joining the rate-hike club in September, the Federal Reserve looks set to stand pat in October, waiting to assess more data before deciding to hike again. Whilst this isn’t an unusual move for a central bank, it somewhat contradicts Fed Chair Kevin Warsh’s new mantra of data dependency and zero forward guidance.

CFTC Report: WTI rally runs ahead of positioning
The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.
What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.