November 19, 2013,
London, England – Business Monitor has just released its latest findings on
Canada’s expanding infrastructure sector in its newly-published Canada
Infrastructure Report.
November 19, 2013,
London, England – Business Monitor has just released its latest findings on
Canada’s expanding infrastructure sector in its newly-published Canada
Infrastructure Report.
Business Monitor has
revised down their outlook for the overall construction industry in Canada for
2013 to 2.2%. This is being driven by a sharper than expected contraction in
industry value creation from the residential and non-residential building
segment. Despite this, they anticipate a slight pick-up in the second half of
the year will ensure that subsector maintains positive growth. On the other
hand, infrastructure will post another year of solid performance, with Business
Monitor’s outlook for robust growth in the subsector unchanged.
Below trend
construction industry data has prompted Business Monitor to downgrade
their 2013 forecast for industry growth, however, they are maintaining their
view that Canada will be one of the best performing developed markets over the
near term. Growth will be supported by high-value infrastructure projects
across the transport and energy sectors, as well as social infrastructure,
industrial projects, and a housing market that whilst slowing, should remain
positive.
The greatest risks to
Business Monitor’s outlook comes from a sharper-than-expected decline in the
housing sector, as well as slowing demand and falling prices in the commodity
sector, forcing developers to stall new capital investment, thereby impacting
supporting infrastructure and industrial projects. They also note the growing
detrimental impact of the regulatory environment on natural resource-related
infrastructure. The rejection of the $5.5 billion Northern Gateway pipeline sets a
poor precedent for other similar projects; whilst the objections to plans to
expand coal export capacity is a concern for investment taking place into
expanding coal production.
Infrastructure
Foundation For Growth Infrastructure remains a fundamental element of
Canada's construction industry growth, with a project pipeline in excess of $120 billion USD. Infrastructure growth should remain stable and solid, at around 4%
over the medium term. There remains upside potential from major pipeline
projects.
One of the strongest
sub-sectors over Business Monitor’s 10-year forecast period to 2022 will be
railways, where a project pipeline worth $36 billion USD will drive annual average
industry value real growth of 4.4% between 2013 and 2022. This growth will be
driven primarily by urban rail projects, including the $8.2 billion Eglinton
Crosstown Light Rail Transit project, the $2.6 billion USD Toronto Subway Spadina line
expansion, the $2.1 billion USD Ottawa Light Rail project and the $1.8 billion USD Edmonton
Light Rail project.
There is further
upside potential to Business Monitor’s forecast from freight rail projects,
however, with the $5 billion Cóte Nord rail project in Quebec temporarily suspended
in February 2013 due to weak demand, they have seen verification for their
decision to withhold these projects from their forecast. In November 2012, a $8.6 billion 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.
The other booming
sector is electricity, where they see $36 billion USD worth of projects under way or in
the planning stages. Huge generating stations are under construction, including
the $6.2 billion USD Lower Churchill Hydropower Project, the $2.6 billion USD Lower Mattagami
Hydropower Project, the 918MW Eastmain-1-A/ Sarcelle/Rupert Project, as well as
extensive transmission line projects, including the 1,380km $3.3 billion USD Bipole III
transmission line and the $1.6 billion USD Eastern Alberta and $1.4 billion USD 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
their 2013 forecast for the sector. Overall, they are forecasting 4.5% average
real growth per year between 2013 and 2022 for the power plants &
transmission grids sub-sector.
The report also sees strong
upside for the overall energy & utilities sector from oil & gas pipelines.
They have registered over $40 billion USD worth of pipelines in the planning phase,
which would provide a significant boost to industry value creation if they all
progress. Business Monitor are pricing in a minimal realization of pipelines
over the medium term, based on the complex and arduous regulatory procedures
for the projects. Indeed, with the rejection of the CAD5.5bn Northern Gateway
pipeline in June 2013, and a major uphill battle ahead for the $12 billion USD Energy
East Pipeline, they are not factoring in any substantial build out in new
pipelines. As it stands, they are anticipating annual average growth of 3.7% in
the oil & gas pipelines sub-sector between 2013 and 2022.
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