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The North America Heavy Construction Sectors : A Company and Industry Analysis (February 2007)
Mergent, Feb 2007
Current Environment - Key Points
- Volatile construction costs continued over the last six months following the hurricanes that hit the Gulf Coast in 2005, creating ongoing difficulties for construction companies and suppliers
- Even though the economy and construction growth slowed, heavy construction stocks rallied throughout the year
- Merger, acquisition and alliance activity in the sector continued to be intense during most of 2006
- The heavy construction sector in Canada continued to profit from a boost in government-funded and private projects
- Despite higher materials costs, top heavy construction players in the US and Canada performed well in the third quarter of 2006
- Canadian and US governments finally took final steps on October 12, 2006 on a trade agreement that aimed to end a 20-year dispute over softwood lumber
Industry Profile - Key Points
- In the first ten months of 2006, non-residential construction spending in the US stood at US$5.53 trillion, an increase of 14.43% from the corresponding period in 2005
- In 2006, construction employers in the US employed a total of 9.25 million workers compared with 8.96 million in 2005
- Construction employment in Canada has been rising steadily, hitting a record high of 11,754.3 thousand jobs in 2006
- The value of construction equipment exports from the US continued to increase in the first half of 2006 to total US$6.68 billion, a 10% rise over the corresponding period in 2005
- Canadian builders forked out C$20.17 billion (US$17.12 billion) worth of permits for non- residential projects, compared with C$18.71 billion (US$15.88 billion) a year earlier
- In Canada, investment in the non-residential sector totaled C$26.1 billion (US$22.15 billion) in the first three quarters of 2006, compared with C$22.2 billion (US$18.84 billion) during the corresponding period in 2005
Market Trends and Outlook - Key Points
- The demand for structural steel, cement and other construction materials is expected to remain robust in 2007, while construction machinery manufacturers predict smaller gains in 2007, following double-digit growth in 2006 - The total for non-residential construction in the US is projected to increase by 12% in 2007, compared with a 6.4% growth in 2005
Non-building construction, such as heavy civil engineering work, is forecast to grow by 11.5% in 2007, compared with 6.6% in 2005
- A greener market is emerging in the heavy construction industry in Canada, as the industry shifts its focus to more environmentally-friendly construction
- The 2010 Winter Olympics is expected to generate up to C$7 billion (US$5.94 billion) in direct economic activity, and will include the construction of an athletes- village, a covered stadium, a curling rink, a winter sports complex, a speed skating oval and an upgraded highway between Vancouver and the skiing resort of Whistler
- The non-residential sector in Canada is expected to slow in 2007, recording a moderate growth rate of 3.2%, compared with an estimated 7.2% in 2006
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