Construction in Slovakia relies on civil engineering for recovery

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As indicated by the results of PMR’s latest report, entitled “Construction sector in Slovakia 2020. Development forecasts for 2020-2025”, the country’s construction output value underwent a 4.5% year-on-year reduction, following a combined 12% growth in 2017-2018. The contraction was instigated mostly by civil engineering, with a 14% drop observed.  

The year 2019 saw a steady collapse month after month in the last quarter of the year, with construction output expanding only three months last year. The negative mood on the market started to gain pace particularly when most of projects entitled for EU co-funding have been tendered already. The non-residential construction also contributed to the market decline, with a 4% reduction in output. Only the residential construction sector registered a positive result in 2019 in comparison with 2018, offsetting in part the contraction of the country’s total construction production.

Non-residential construction has traditionally dominated the Slovak construction market, and its share as a proportion of the country’s total construction output even exceeded the 50% threshold in 2012. In 2015 the civil engineering subgroup represented the most substantial proportion for a decade. For the year in question, its share as a proportion of total construction output rose to more than 37%, consuming part of the share accounted for by building construction. The substantial increase was a result of the flood of investments in transport infrastructure construction to absorb the remaining 2017-2013 EU funding. In 2016, however, as investments in infrastructure decreased after the flurry of developments in the previous year, the share of civil engineering in total construction declined again to 32%, but managed to regain 5 p.p. of market share in the following two years. However, its share dropped again in 2019, as the civil engineering output in Slovakia observed a double-figure reduction last year.

Civil engineering construction output contracted markedly in 2019, following two years of 29% cumulative growth. The 14% reduction year on year in real terms observed in 2019 was generated, to a large extent, by the high base for comparison as well as by significant reduction in the development of utility and power networks.

Every year, more than 60% of the civil engineering output in the country is generated by transport infrastructure projects. In recent years, the upsurge in proportion   has been fuelled by the government’s drive to spend the EU co-funding allocated for the 2014-2020 programming period. Much of this money was spent on road construction, which is, by far, the key driver behind the growth of civil engineering construction output.

The recent recovery in construction output in Slovakia has also boosted cement production in the country. After the year 2008, when Slovakia recorded a record-high volume of cement production of 4.16 million tonnes, the indicator fell by 28% in 2009 to around 3 million tonnes. According to SUSR, the cement industry has been growing steadily since 2013. In Slovakia, cement production is estimated to have expanded gradually at a CAGR of 2.8% between 2015 and 2019, supported mostly by sizeable growth in civil engineering and non-residential construction.

According to PMR, cement production came to 3.8 million tonnes in 2019, which was 2.3% less than a year before and also falling 8% short of the record high production reached in 2008 (4.16 million tonnes). Nevertheless, in 2019 cement consumption is estimated to have been increased by around 1% year on year to about 2.4 million tonnes, following a 9% upsurge a year before.

The leading cement company is the country is CRH, which operates two plants (in Rohoznik and Turna, received from Holcim) with a combined annual capacity of 3.5 million tonnes. According to PMR, CRH has been responsible for about 58% of cement output in Slovakia in recent years.