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 Metals Prices W orld Carbon Steel Product Prices ( October 2 0 0 2 – March 2 0 0 9 ) $ US/ Tonne $1,350 $1,300 September 2008: Beginning of Global $1,250 Financial Crisis $1,200 2004: Construction Starts for 2008 $1,150 Olympics in China Emerging markets - Growth far exceeding that $1,100 of developed economies, resulting in greater $1,050 global demand for resources August 8, 2008: Beginning of $1,000 Summer Olympics in China $950 $900 $850 $ U S /T o n n e Mergers, acquisitions, import surges, $800 bankruptcies and market weakness $750 have been roiling the North American $700 steel industry $650 $600 $550 $500 $450 Some Stability in Cost of $400 Commodities Jan 2009 $350 Change in Total Value of selected commodities (Jul 08 - Mar 09) -49% $300 $250 $200 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 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% 2 Source: Altus Group Cost Consulting based on data from MEPS Economic Consulting
Crude Oil Prices Crude Oil Prices 2008 Beginning of Global Financial 600 Crisis. Refinery Problems - End of July Price at Crude Oil Ethanol Switch. over $148 U.S. / B. Recovery from Hurricanes 500 Asian Demand Soars 05 - Present 400 Series of OPEC PDVSA Strike, Cuts 4.2 Million Iraq War, Index, 1997 = 100 Iraq Invades Barrels Asian Growth Iran (75%) 300 U.S. Price 9/11 Gulf War OPEC 10% Quota Controls Iraq Invades Increase. Asian Kuwait Aug. Economic Crisis 200 1990 100 Some Stability Feb/Mar 2009 Minimal Y2K $38-$52 Kyoto Protocol Problems 0 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 3 Period Source: Altus Group Cost Consulting based on data from Statistics Canada Economic Consulting
Building Product Price Monitor Building Product Price Monitor 1997=100 250 Ready Mix Stamped and Pressed Metal 200 Lumber and Softwood Asphalt Paving and Roofing 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 4 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Building Product Price Monitor Building Product Price Monitor Year-to-Year % Change 60 50 Ready Mix Stamped and Pressed Metal 40 Lumber and Softwood 30 Asphalt Paving and Roofing 20 10 0 -10 -20 -30 N N N M M S M M S M M S 2006 J J 2007 J J 2008 J J 2009 J 5 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Construction Costs are Traditionally More Construction Costs are Traditionally More Stable than Com m odities Stable than Com m odities 1997=100 200 Raw Materials Price Index (Steel Foundry Inputs) Industrial Product Price Index (Stamped and Pressed Metals) 175 Fabricated Products (Doors and Windows, Frames, Metal) 150 125 100 75 50 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 6 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Construction Costs are Traditionally More Construction Costs are Traditionally More Stable than Com m odities Stable than Com m odities Year-to-Year % Change 40 Raw Materials Price Index (Steel Foundry Inputs) 30 Industrial Product Price Index (Stamped and Pressed Metals) Fabricated Products (Doors and Windows, Frames, Metal) 20 10 0 -10 -20 M M S N M M S N M M S N 2006 J J 2007 J J 2008 J J 2009 J 7 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
No Slow Dow n in Construction W ages No Slow Dow n in Construction W ages Average Wages, $/Week, Full Time 1,100 BC - Construction Sector Workers 1,050 BC - All Workers Canada - Construction Sector Workers 1,000 950 900 850 800 750 May-04 May-05 May-06 May-07 May-08 Mar-04 Nov-04 Mar-05 Nov-05 Mar-06 Nov-06 Mar-07 Nov-07 Mar-08 Nov-08 Mar-09 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 8 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Median Price and Months I nventory of New Hom e Sales, United States Yr.-to-Yr. % Change in Median Home Price Months Inventory 42 14 Months Inventory Months Inventory Feb. 2008 9.8 36 12 Feb. 2009 12.2 Median Price 30 10 Median Price Yr-to-Yr %Change $200,900 -9.98 24 8 18 6 12 4 6 2 0 0 -6 -2 -12 -4 2001 2002 2003 2004 2005 2006 2007 2008 2009 9 Note: Data are three-month moving averages Source: Altus Group Economic Consulting based on data from U.S. Census Bureau Economic Consulting
New Hom e Price and Months I nventory of New Hom es* , Canada Yr.-to-Yr. % Change in Median Home Price Months Inventory 30 6 Months Inventory Months Inventory Feb. 2008 1.1 25 5 New Home Price Feb. 2009 2.2 NHPI** (1992 = 100) Yr-to-Yr 20 4 %Change 155.3 -1.8 15 3 10 2 5 1 0 0 -5 -1 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 *Completed but unabsorbed homes compared with monthly starts (SA), All Centres of 50,000 population 10 and over; ** New House Price Index Source: Altus Group Economic Consulting based on data from CMHC and Statistics Canada Economic Consulting
Real GDP Grow th Real GDP Grow th Annual % Change 5.0 Canada B.C. 4.4 4.4 4.5 4.0 3.6 3.6 3.5 3.1 3.1 3.0 2.9 2.9 3.0 2.7 2.3 2.5 1.9 1.8 2.0 1.5 1.2 1.0 0.6 0.5 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008* * Estimate for B.C. 11 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Net I nterprovincial Migration, British Colum bia Net I nterprovincial Migration, British Colum bia 1 9 9 8 -2 0 0 8 1 9 9 8 -2 0 0 8 Persons 6,000 4,000 2,000 0 (2,000) (4,000) (6,000) (8,000) 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 12 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Real GDP Grow th Real GDP Grow th Quarterly % Change at Annual Rates 6.0 4.1 4.2 4.1 Forecast Area 4.0 3.8 4.0 2.9 2.3 2.1 1.6 1.1 2.0 0.6 0.9 0.8 0.8 0.0 (0.9) -2.0 -4.0 (3.4) Canada -6.0 -8.0 I III I III I III I III I III I III 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 * Estimate for B.C. 13 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Job Grow th Job Grow th Annual % Change 3.3 3.5 3.2 3.1 Canada B.C. 3.0 2.5 2.4 2.4 2.4 2.3 2.5 2.3 2.1 2.0 2.0 1.8 1.5 1.4 1.5 1.2 1.0 0.5 0.0 -0.5 -0.5 -1.0 2001 2002 2003 2004 2005 2006 2007 2008 * Estimate for B.C. 14 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Job Grow th Job Grow th Annual % Change 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 Canada B.C. -3.0 -4.0 August September November April December January February March June July October January February March May 2 0 0 8 2 0 0 9 * Estimate for B.C. 15 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Construction Jobs Construction Jobs Construction Employment in Thousands Percentage of Total Employment (line) 13.0 250 B.C. 11.0 200 9.0 150 7.0 100 5.0 50 3.0 0 2001 2002 2003 2004 2005 2006 2007 2008 16 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Building Perm its By Sector, British Colum bia Building Perm its By Sector, British Colum bia $ Billions 10.0 Residential Non-Residential 8.0 6.0 4.0 2.0 0.0 2003 2004 2005 2006 2007 2008 17 Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
Oil and Gas Capital Engineering I nvestm ent Oil and Gas Capital Engineering I nvestm ent 2007$ Billions 50.0 Canada 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 18 * Statistics Canada Private and Public Investment Intentions Survey Source: Altus Group Economic Consulting based on data from Statistics Canada Economic Consulting
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