Concurrent Session C1 Construction Costs: How Much Low er W ill - - PowerPoint PPT Presentation

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Concurrent Session C1 Construction Costs: How Much Low er W ill - - PowerPoint PPT Presentation

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Concurrent Session C1 Construction Costs: How Much Low er W ill Costs Go Before I t Makes Sense to Build Again? April 23, 2009 Peter Norman, MA, PLE Senior Director, Altus Group Economic Consulting 1 Economic Consulting Metals Prices

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Economic Consulting

Concurrent Session C1 Construction Costs: How Much Low er W ill Costs Go Before I t Makes Sense to Build Again?

Peter Norman, MA, PLE Senior Director, Altus Group Economic Consulting

April 23, 2009

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Metals Prices Metals Prices

W orld Carbon Steel Product Prices ( October 2 0 0 2 – March 2 0 0 9 ) $ US/ Tonne

$200 $250 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 $1,300 $1,350

O ct‐2 0 0 2 M a y ‐2 0 0 3 D ec‐2 0 0 3 Ju ly ‐2 0 0 4 F eb ‐2 0 0 5 S ep ‐2 0 0 5 A p r‐2 0 0 6 N o v ‐2 0 0 6 Ju n ‐2 0 0 7 Ja n ‐2 0 0 8 A u g ‐2 0 0 8 M a r‐2 0 0 9 $ U S /T o n n e

Hot Rolled Coil (Jul 08‐Mar 09) ‐54% Hot Rolled Plate (Jul 08‐Mar 09) ‐51% Cold Rolled Coil (Jul 08‐Mar 09) ‐50% HD Galv. Coil (Jul 08‐Mar 09) ‐47% Electro Zinc Coil (Jul 08‐Mar 09) ‐45% Wire Rod (mesh) (Jul 08‐Mar 09) ‐51% Structural Sections & Beams (Jul 08‐Mar 09) ‐42% Rebar (Jul 08‐Mar 09) ‐55% Merchant Bar (Jul 08‐Mar 09) ‐44%

Change in Total Value of selected commodities (Jul 08 - Mar 09) -49% September 2008: Beginning of Global Financial Crisis August 8, 2008: Beginning of Summer Olympics in China 2004: Construction Starts for 2008 Olympics in China Mergers, acquisitions, import surges, bankruptcies and market weakness have been roiling the North American steel industry Emerging markets - Growth far exceeding that

  • f developed economies, resulting in greater

global demand for resources Some Stability in Cost of Commodities Jan 2009

Source: Altus Group Cost Consulting based on data from MEPS

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100 200 300 400 500 600 Jan- 81 Jan- 83 Jan- 85 Jan- 87 Jan- 89 Jan- 91 Jan- 93 Jan- 95 Jan- 97 Jan- 99 Jan- 01 Jan- 03 Jan- 05 Jan- 07 Jan- 09

Period Index, 1997 = 100 Crude Oil

Gulf War Iraq Invades Kuwait Aug. 1990 OPEC 10% Quota

  • Increase. Asian

Economic Crisis Series of OPEC Cuts 4.2 Million Barrels 9/11 PDVSA Strike, Iraq War, Asian Growth 2008 Beginning of Global Financial Crisis. End of July Price at

  • ver $148 U.S. / B.

U.S. Price Controls Some Stability Feb/Mar 2009 $38-$52 Iraq Invades Iran Kyoto Protocol Minimal Y2K Problems Refinery Problems - Ethanol Switch. Recovery from Hurricanes Asian Demand Soars 05 - Present

(75%)

Crude Oil Prices Crude Oil Prices

Source: Altus Group Cost Consulting based on data from Statistics Canada

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Building Product Price Monitor Building Product Price Monitor

50 100 150 200 250 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Ready Mix Stamped and Pressed Metal Lumber and Softwood Asphalt Paving and Roofing

1997=100

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Building Product Price Monitor Building Product Price Monitor

  • 30
  • 20
  • 10

10 20 30 40 50 60 2006 J M M J S N 2007 J M M J S N 2008 J M M J S N 2009 J

Ready Mix Stamped and Pressed Metal Lumber and Softwood Asphalt Paving and Roofing

Year-to-Year % Change

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Construction Costs are Traditionally More Stable than Com m odities Construction Costs are Traditionally More Stable than Com m odities

50 75 100 125 150 175 200 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Raw Materials Price Index (Steel Foundry Inputs) Industrial Product Price Index (Stamped and Pressed Metals) Fabricated Products (Doors and Windows, Frames, Metal)

1997=100

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Construction Costs are Traditionally More Stable than Com m odities Construction Costs are Traditionally More Stable than Com m odities

  • 20
  • 10

10 20 30 40 2006 J M M J S N 2007 J M M J S N 2008 J M M J S N 2009 J

Raw Materials Price Index (Steel Foundry Inputs) Industrial Product Price Index (Stamped and Pressed Metals) Fabricated Products (Doors and Windows, Frames, Metal)

Year-to-Year % Change

Source: Altus Group Economic Consulting based on data from Statistics Canada

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No Slow Dow n in Construction W ages No Slow Dow n in Construction W ages

750 800 850 900 950 1,000 1,050 1,100

Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09

BC - Construction Sector Workers BC - All Workers Canada - Construction Sector Workers

Average Wages, $/Week, Full Time

Source: Altus Group Economic Consulting based on data from Statistics Canada

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  • 12
  • 6

6 12 18 24 30 36 42 2001 2002 2003 2004 2005 2006 2007 2008 2009

  • 4
  • 2

2 4 6 8 10 12 14

Months Inventory Median Price

Yr.-to-Yr. % Change in Median Home Price Months Inventory

Median Price and Months I nventory of New Hom e Sales, United States

Note: Data are three-month moving averages Source: Altus Group Economic Consulting based on data from U.S. Census Bureau Months Inventory

  • Feb. 2008

9.8

  • Feb. 2009

12.2 Median Price Yr-to-Yr %Change $200,900

  • 9.98
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  • 5

5 10 15 20 25 30 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

  • 1

1 2 3 4 5 6

Months Inventory New Home Price

Yr.-to-Yr. % Change in Median Home Price Months Inventory

New Hom e Price and Months I nventory of New Hom es* , Canada

*Completed but unabsorbed homes compared with monthly starts (SA), All Centres of 50,000 population and over; ** New House Price Index Source: Altus Group Economic Consulting based on data from CMHC and Statistics Canada Months Inventory

  • Feb. 2008

1.1

  • Feb. 2009

2.2 NHPI** (1992 = 100) Yr-to-Yr %Change 155.3

  • 1.8
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Real GDP Grow th Real GDP Grow th

1.8 2.9 1.9 3.1 2.9 3.1 2.7 0.5 0.6 3.6 2.3 3.6 4.4 4.4 3.0 1.2 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 2001 2002 2003 2004 2005 2006 2007 2008*

Annual % Change

Canada B.C.

* Estimate for B.C. Source: Altus Group Economic Consulting based on data from Statistics Canada

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Net I nterprovincial Migration, British Colum bia 1 9 9 8 -2 0 0 8 Net I nterprovincial Migration, British Colum bia 1 9 9 8 -2 0 0 8

Persons

(8,000) (6,000) (4,000) (2,000) 2,000 4,000 6,000 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Real GDP Grow th Real GDP Grow th

0.8 2.9 4.1 4.2 4.1 1.6 1.1 2.1 4.0 3.8 2.3 0.8 (0.9) 0.6 0.9 (3.4)

  • 8.0
  • 6.0
  • 4.0
  • 2.0

0.0 2.0 4.0 6.0 I 2005 III 2005 I 2006 III 2006 I 2007 III 2007 I 2008 III 2008 I 2009 III 2009 I 2010 III 2010

Quarterly % Change at Annual Rates

Canada

* Estimate for B.C. Source: Altus Group Economic Consulting based on data from Statistics Canada Forecast Area

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Job Grow th Job Grow th

1.2 2.4 2.4 1.8 1.4 2.0 2.3 1.5

  • 0.5

2.3 2.5 2.4 3.3 3.1 3.2 2.1

  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2001 2002 2003 2004 2005 2006 2007 2008

Annual % Change

Canada B.C.

* Estimate for B.C. Source: Altus Group Economic Consulting based on data from Statistics Canada

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Job Grow th Job Grow th

  • 4.0
  • 3.0
  • 2.0
  • 1.0

0.0 1.0 2.0 3.0 4.0 January February March April May June July August September October November December January February March

Annual % Change

Canada B.C. 2 0 0 8 2 0 0 9

* Estimate for B.C. Source: Altus Group Economic Consulting based on data from Statistics Canada

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Construction Jobs Construction Jobs

3.0 5.0 7.0 9.0 11.0 13.0 2001 2002 2003 2004 2005 2006 2007 2008 50 100 150 200 250

Percentage of Total Employment (line) Construction Employment in Thousands

B.C.

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Building Perm its By Sector, British Colum bia Building Perm its By Sector, British Colum bia

0.0 2.0 4.0 6.0 8.0 10.0 2003 2004 2005 2006 2007 2008 $ Billions

Residential Non-Residential

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Oil and Gas Capital Engineering I nvestm ent Oil and Gas Capital Engineering I nvestm ent

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2007$ Billions

Canada

* Statistics Canada Private and Public Investment Intentions Survey Source: Altus Group Economic Consulting based on data from Statistics Canada

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Engineering Construction I nvestm ent Engineering Construction I nvestm ent

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2007$ Billions Oil and Gas Governm ent Private Sector

Source: Altus Group Economic Consulting based on data from Statistics Canada

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“Stim ulus” I nfrastructure Spending “Stim ulus” I nfrastructure Spending

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 2008 2009 Fiscal 09/10 Fiscal 10/11 Fiscal 11/12 2007$ Billions Oil and Gas Oil and Gas Governm ent Governm ent Private Sector Private Sector

?

Note: Nova Scotia 2009 budget not out yet Source: Altus Group Economic Consulting based on data from Statistics Canada

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“Stim ulus” I nfrastructure Spending “Stim ulus” I nfrastructure Spending

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 2008 2009 Fiscal 09/10 Fiscal 10/11 Fiscal 11/12

PEI Newfoundland and Labrador New Brunswick Manitoba Saskatchewan Quebec BC Alberta Ontario Federal (Existing) Federal (new)

2007$ Billions Oil and Gas Oil and Gas Governm ent Governm ent Private Sector Private Sector

?

2 0 0 9 Budgets 2 0 0 9 Budgets

Note: Nova Scotia 2009 budget not out yet Source: Altus Group Economic Consulting based on data from Statistics Canada

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Non-Residential Building Price I ndex, Vancouver Non-Residential Building Price I ndex, Vancouver

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 2001 2002 2003 2004 2005 2006 2007 2008 Year-over-Year % Change Q/Q Annualized % Change Percent

Source: Altus Group Economic Consulting based on data from Statistics Canada

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Apartm ent Building Price I ndex, Vancouver Apartm ent Building Price I ndex, Vancouver

  • 25
  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 2001 2002 2003 2004 2005 2006 2007 2008 Year-over-Year % Change Q/Q Annualized % Change Percent

Source: Altus Group Economic Consulting based on data from Statistics Canada

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PANEL DISCUSSION