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North America

North America Construction Costs

Since these new US imposed tariffs mentioned above have been introduced, a number of US based steel and aluminum producers have been “swamped” with new bidding opportunities from both domestic and international companies, this could pave the way for the construction and expansion of new steel and aluminum production facilities in the US.

US new construction starts in the 1st half of 2018 increased by 8.5% from 2017 levels. The Trump administration managed to pass a new tax law will have a positive impact on the USA construction sector. The corporate tax rate was changed from 35% to 21%, a 60% reduction. The Trump administration has proposed an American Energy & Infrastructure plan that sets out possible public-private investment to stimulate a $1 + trillion budget for future infrastructure expenditures (roads, railways, bridges and airports) over the next decade, the jury is still out on when this legislation will be enacted.

The US is the front runner of the 35 OECD major industrialized countries with 3.6% projected growth going into the 2nd half of 2018. Bagged and bulk cement is forecast to rise by 3.1% to 3.7% in 2018. Structural Steel / Rebar is projected to increase by 2.7% to 3.5% in 2018. Timber framing / Plywood are anticipated to increase by 6.3% to 8.3% in 2018 over 2017 values. US ready-mixed concrete costs have increased by 2.8% to 4.6% in the last twelve months. Copper products are forecast to rise by 1.9% to 4.2% in 2018 and PVC pipe is estimated to increase by 1.9% to 2.2%. Construction labor costs are forecast to increase by 2.5% to 3.5% in 2018 over 2017 levels. Drywall related costs in 2018 are projected to rise by 4.9% to 5.8% over 2017 pricing levels, due in the main part to the significant improvement in the US “new” housing market.

The US overall unemployment rate in the 2nd half of 2018 is forecast to be in the in the 3.7% to 3.9% range. US construction unemployment fell to 4.6% in June, down from 6.7% only six months previously. The US is currently experiencing a shortage of skilled workers (especially electrician, welders and pipefitters), especially in Texas and Florida.  Construction in the US is forecast to expand by 3.5% to 4.7% per year for the next two to three years. The US population is currently 328 million, this number is projected to increase to 338 million in the next three years (a 3% increase), driving the need for more houses, schools and infrastructure projects. Steel and aluminum products could see a major price hike of between 6% and 12% in the 2nd half of 2018 now that the US has imposed tariffs on imported steel and aluminum.

There is a major need in the US to build highways, bridges and tunnels and to significantly modernize the overall highway and interstate system, this situation will be one of the key elements that drives the construction industry forward. Since these new US imposed tariffs mentioned above have been introduced a number of US based steel and aluminum producers have been “swamped” with new bidding opportunities from both domestic and international companies, this could pave the way for the construction and expansion of new steel and aluminum production facilities in the US.

The US construction industry will keep on its growth cycle in 2018, the industry needs more construction professionals, skilled and non-skilled workers, this will result in labor and material shortages that will drive salaries, hourly wage rates and material costs. Look for inflation to rear its ugly head again in the 4th Q of 2018.

We are starting to see US Engineering and Construction Management firms raising their billing rates and profit margins, look for costs of these services to increase by 3% to 5% in 2018 over 2017 rates.

New US single-family homes are forecast to have a good 2018, increasing by 6% to 10% over 2017 activity. The forecast for new home sales is in the 800,000 to 1,000,000 units for 2018, up significantly from a couple of years back. The US commercial construction sector (Offices, Hotels, Single Family Homes etc.,) will experience a steady improvement in the 2nd half of 2018, consumer confidence continues to improve. Industrial construction such as refineries, gas facilities, chemical and power plants are forecast to see steady growth in the 2% to 4% range in the 2nd half of 2018 over 2017. Commercial construction such as offices, hotels, shopping malls and similar facilities are forecast to grow by 3.5% to 5.5% in 2018 over 2017 levels. Infrastructure such as transportation, water supply and waste water construction is forecast to grow by 3.5% to 5.5% in 2018 over 2017 levels.

The US will become the world’s top oil producer in the 2nd half of 2018, producing more than 11 million barrels of oil per day leapfrogging over both Russia and Saudi Arabia. US Natural Gas / Shale Oil / Ethane / LNG exports to Europe and Asia are projected to grow substantially over the next decade or two as US shale oil and gas production increases.

Canada’s construction industry is expected to advance over the next two to three years to a market in excess of C$300 billion. The Canadian Dollar has continued to weaken to 1.33 to the US Dollar, the strengthening Oil / Gas and commodities markets around the world has not helped the Canadian Dollar, which is hard to explain.  Oil related construction in Alberta has slowed down appreciably in the last 18 – 30 months, however a couple of projects have been approved in the last month or two with Oil starting to trend upwards to the $65 to $70 a barrel range. Canadian construction costs (labor and materials) are forecast to stay relatively flat rising no more than 2.7% to 3.1%.in the 2nd half of 2018. Canada’s expanding population, its flourishing housing market and internal industry production / manufacturing endeavors will be the primary actions that supports this growth.

The population of Canada is growing; this growth will have a positive impact on New and Existing Homes / Apartments, Health Care, Hotels, Retail and Office construction. Overall, Canadian construction (with the exception of Oil / Gas construction) is primed to have a decent 2nd half in 2018. With Oil trading in the $65 to $70 look for some major Oil / Gas projects to be given the “green” light to proceed in the next three months. The latest 2018 GDP growth forecast is 2.3%, similar to a year ago, inflation is forecast to be in the 2.3% to 2.5% and unemployment is set to finish the year in the 5.4% to 5.7% range.

The Mexican construction market is set to expand by 3% to 4% in the 2nd half of 2018, infrastructure and overall industry growth will be the sectors that drive this growth. Mexico is now a larger economy than Brazil, however the possible changes to the current NAFTA agreement could seriously impact both Canada and Mexico. The current thinking is that the Mexican construction sector could slow down quite rapidly in the next six to nine months as private investors and government agencies make sense of what a new NAFTA agreement means to the Mexican economy. The Mexican Peso is currently trading at 20.50 Pesos to the US Dollar (6/21/2018), a drop of 10% since the 8th November 2016 USA election. While a cheaper Mexican Peso may seem to boost exports to other countries and tourism from the USA, it would make imports into Mexico more expensive and it could possibly increase the current inflation rate to 3.5% or 4.5% by the 2nd Q of 2018.



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