Canada Infrastructure Report Q1 2013
- ID: 2373682
- January 2013
- Region: Canada
- 87 pages
- Business Monitor International
BMI View: Canada remains our developed market construction sector outperformer. Despite the potential threat from an overheating housing market, commodity price weakness and an underperforming commercial building segment, we believe the country's construction industry growth will outperform its developed market peers over the near term. Following a deceleration in construction industry real growth in 2012, we expect a pickup in 2013 (3.8% year-on-year in real terms). This view id supported by the country's infrastructure sector, due to the high number of rail and electricity projects in the pipeline.
Data for the first eight months of 2012 is in line with our belief that construction growth slowed as the year progressed, from the 4.1% year-on-year (y-o-y) real growth seen in 2011. As a result, we are maintaining our estimated 3.2% y-o-y growth for full-year 2012. Despite the sector moving into 2013 with less momentum than in previous years, we expect growth to pick up, with a number of high value infrastructure projects due to enter the construction phase. We also expect the non-residential segment, which weighed on growth over 2012, to pick up as a result of industry projects linked to natural resource extraction and processing. However, the housing segment will continue to decelerate slowly.
The greatest risks to our outlook come from a sharper-than-expected decline in the housing sector, slowing demand and falling prices in the commodity sector, which are forcing developers to stall new capital investment, thereby impacting supporting infrastructure and industrial projects.
Infrastructure Foundation For GrowthInfrastructure remains a fundamental element of Canada's construction industry growth, with a project pipeline in excess of US$120bn. Whilst we envisage belowtrend growth in 2013 and 2014, there is significant upside to our view if projects are able to bypass regulatory red tape quickly.
One of the strongest sub-sectors over our 10-year forecast period will be railways, where a project pipeline worth US$36bn will drive annual average industry value real growth to 4.3% between 2013 and 2021. This growth will be driven primarily by urban rail projects, including the CAD8.2bn Eglinton Crosstown Light Rail Transit project, the US$2.6bn Toronto Subway Spadina line expansion, the US$2.1bn Ottawa Light Rail project and the US$1.8bn Edmonton Light Rail project.
The biggest upside potential to our forecast is from a couple of freight rail projects, which are far from certain. In November 2012, a CAD8.6bn railway project to transport crude from Alberta's oil sands to Alaska moved forward. The project has support from First Nations groups and is seeking financing to produce a feasibility study. In October 2012, it was reported that the CAD5bn Cóte Nord rail project in Quebec would submit an environmental impact statement. The 800km railway connecting the Port of Sept-
Iles on the Gulf of St. Lawrence to the Schefferville mining region in Quebec is being developed by CN Rail, La Caisse and five mining companies.
The other booming sector is electricity, where we see US$36bn worth of projects under way or in the planning stages. Huge generating stations are under construction, including the US$6.2bn Lower Churchill Hydropower Project, the US$2.6bn Lower Mattagami Hydropower Project, the 918MW Eastmain-1-A/
Sarcelle/Rupert Project, as well as extensive transmission line projects including the 1,380km US$3.3bn Bipole III transmission line and the US$1.6bn Eastern Alberta and US$1.4bn Western Alberta transmission lines. Wind power projects are also being developed across the country, although regulatory uncertainty weighed on 2012 projects, 2013 is expected to be a record year for new installations, which presents upside to our 2013 forecast for the sector. Overall, we are forecasting 4.5% average real growth per year between 2013 and 2021 for the power plants & transmission grids sub-sector.
We also see strong upside for the overall energy & utilities sector from oil & gas pipelines. We have registered US$20bn worth of pipelines in the planning phase, which would provide a significant boost to industry value creation if they all progress. We are pricing in a minimal realisation of pipelines over the medium term, based on the complex regulatory procedures for the projects. If we see movement forward on any of the big pipelines proposed, we are likely to revise up our outlook. As it stands, we are anticipating annual average growth of 4.5% in the oil & gas pipeline sub-sector, peaking at 6.1% in 2014.
Residential & Non-Residential Balance Out One of the strongest sources of growth over 2012 was residential construction. The first eight months of 2012 saw a continuation of strong residential construction sector growth, with real industry net output growth of 5.6% y-o-y registered in the first eight months of the year. However, growth slowed as the year progressed, supporting our previously-held view that there would be a gradual deceleration over the latter half of 2012. Government plans to slow mortgage growth appear took hold as expected in the second half of the year. The pace of growth in house prices is slowing, with gains declining y-o-y for the 11th consecutive month in October 2012 and house prices up just 0.2% quarteron-
quarter. At the same time, housing starts appear to be past their peak, falling for a second consecutive month in October 2012.
Over 2012, residential construction growth began to be eroded by persistently weak output data from the non-residential sector, registering a 3% y-o-y contraction in the first eight months of the year. Despite a strong first quarter for non-residential permits, Q212 saw the pace slow, with only a 3.2% increase seen in the first six months of the year (compared to a 10% increase in the first four months). Growth in this segment has been driven predominantly by institutional buildings, primarily in Ontario - specifically medical facilities and government buildings. This growth in permits should see the sub-sector positively contribute to construction industry value in 2013 and help to offset some of the anticipated slowdown in residential building. We also expect see additional support for growth based on industrial projects related to the natural resource sector. Overall, the residential and non-residential building industry is expected to post 3.8% and 3.6% growth respectively in 2013 and 2014 respectively. SHOW LESS READ MORE >
BMI Industry View 7
BMI Industry View 7
Industry Forecast 12
Construction And Infrastructure Forecast Scenario 12
Table: Table: Canada Construction And Infrastructure Industry Data, 2010 - 2016 12
Table: Table: Canada Construction And Infrastructure Long-Term Forecasts, 2015 - 2021 13
Transport Infrastructure - Outlook And Overview 20
Table: Table: Canada Transport Infrastructure Industry Data, 2010 - 2016 20
Table: Table: Canada Transport Infrastructure Long-Term Forecast, 2015 - 2021 21
Table: Table: Major Projects - Transport 26
Energy And Utilities Infrastructure - Outlook And Overview 32
Table: Table: Canada Energy and Utilities Infrastructure Industry Data, 2010 - 2016 32
Table: Table: Canada Energy and Utilities Infrastructure Long-Term Forecasts, 2015 - 2021 33
Table: Table: Major Projects - Energy and Utilities 40
Residential/Non-Residential Construction - Outlook And Overview 44
Table: Table: Canada Residential and Non-residential Building Industry Data, 2010-2016 44
Table: Table: Canada Residential and Non-residential Building Long Term Forecasts, 2016-2021 45
Table: Major Projects - Residential/ Non-Residential Contruction 51
Industry Risk Reward Ratings 54
Industry Risk Reward Ratings 54
Regional Industry Risk Reward Ratings 55
Europe: Macroeconomic Woes Remain Ongoing 56
US: Recovery On Track 57
Australia: Downgrade Potential Growing 58
Canada: Plenty Rewards To Realise 59
Table: Developed States Infrastructure Risk Reward Ratings 59
Market Overview 61
Competitive Landscape 61
Table: Table: EQS Data 61
Table: Table: Notable Sector Players - Canadian Pension Funds Infrastructure Portfolio, CADmn 64
Building Materials Overview 64
Cement Forecast 68
Table: Table: Canada Cement Production and Consumption Data, 2009 - 2016 68
Table: Table: Canada Cement Production and Consumption Data, 2014 - 2021 69
Company Profile 70
Global Industry Overview 75
Global Industry Overview 75
Data Methodology 82
Capital Investment 84
Table: Infrastructure Business Environment Indicators 86