Hurricane Harvey made landfall on the Texas coast late August the damage and repairs to property could cost anywhere from $10 to $25 billion and could take up to 18 months for the construction work to be completed.
The US EPC sector is forecast to continue to experience decent growth in 2018. The 2nd half of 2017 should be good for oil & infrastructure related construction in the USA. The forecast for 2017 GDP growth for the US is 2.6%. $150 to $300 million of Federal Construction (bridges, roads, railroads etc.,) are forecast to be approved by the 3rd Q of 2017. Construction growth in the USA & Canada will be driven by the improving economy & increased government expenditures on public related infrastructure programs.
Further specifics are starting to materialize about The Trump administrations Infrastructure Plan, $150 to $300 million of Federal Construction (bridges, roads etc.,) are forecast to be approved by September.
US construction labor costs are increasing on average by 1.9% to 2.4% per year. Generally, US construction bulk materials are increasing between 4.7% & 5.7%, up considerably from a year back. Cement is forecasted to increase from 1.6% to 1.8%, structural steel is set to increase by 2.7% to 3.4%, PVC pipe are set to increase by 0.5% to 0.8%, timber / lumber products are forecast to increase by 6.5% to 7.5% in 2017 from 2016 pricing levels. Copper pipe / products are increasing between 8% & 12% from 2016 pricing levels.
Construction activity overall in the US is forecast to increase by 3% to 4% in 2017 over 2016 levels. New U.S. single-family homes are forecast to have a decent 2017 increasing by 7% to 9% over 2016 activity. Industrial construction such as refineries, gas facilities, chemical & power plants are forecast to see steady growth in the 2% to 4% range in the 2nd half of 2017 over 2016 2nd half levels.
The Trump administration is presumed to push ahead with additional Oil & Gas exploration & drilling on US federal lands in western states such as New Mexico, Arizona & Colorado. All of this translates to greater Engineering & Construction / CAPEX activity in the U.S. in 2017 & beyond. A new 500 mile $1.8 billion pipeline project linking Midland, Texas and Corpus Christi, Texas will transport 300,000 barrels of oil per day from the Permian Basin to refineries on the Gulf Coast. Increased U.S .Oil & Gas production will mean less imported oil from countries such as Venezuela, Nigeria & Saudi Arabia – these countries may be forced to discount their prices, it is not unrealistic to see oil trading in the $35 to $45 a barrel range in December, 2017.
Home builders are forecasting a 5% to 8% increase in new home sales from 2016 levels. The forecast for new home sales is in the 750,000 to 850,000 units for 2017, 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 2st half of 2017 consumer confidence continues to improve.
Pipe fabrication costs are forecast to increase by 1.8% to 2.5% over 2016 pricing levels due to the significant ongoing work on the multibillion dollar CAPEX projects currently being executed on the US Gulf Coast. Drywall, plywood, framing timber & drywall costs are increasing year to year by 2.5% to 5.5%, due to improvement in the US “new” housing market, however steel products such rebar & structural shapes still remains depressed. Look for structural steel / pipeline products to start increasing again by 1.5% to 2.5% in the 2nd half of 2017.
The US Gulf Coast region (Texas and Louisiana) has seen field labor cost increase between 3.2% to 3.7% in the last year. There continues to be a shortage of skilled workers (welders, pipefitters, millwrights, electricians & instrumentation technicians) in this region due to the 10 + ethylene, refinery expansions & LNG export terminals that are currently being constructed. A number of these facilities will be substantially completed by the 4th Q of 2017 & 2nd Q of 2018.
Commercial construction such as offices, hotels, shopping malls & similar facilities are forecast to grow by 3.5% to 5.5% in 2017 over 2016 levels. Infrastructure such as transportation, water supply and waste water construction is forecast to grow by 3.3% to 5.2% in 2017 over 2016 levels.
The US overall unemployment rate in the 2nd half of 2017 is forecast to be in the in the 4.3% range. Unemployment in the US construction sector is in the 5.5% to 6.0% range, a huge improvement from a couple of years back. US Natural Gas / Shale Oil / Ethane / LNG exports are projected to grow appreciably over the next decade or two as US shale oil and gas production increases.
The Canadian Dollar has stabilized to 1.26 to the US Dollar, the weakening of oil / gas & commodities markets around the world has seriously impacted the Canadian construction sector. Oil related construction in Alberta has slowed down appreciably in the last 12 – 18 months. Construction costs labor & materials are forecast to stay relatively flat in the 2nd half of 2017.
The population of Canada is growing; this growth will have a positive impact on New Home / Apartments, Health Care, Hotels, Retail & Office construction. Overall, Canadian construction with the exception of Oil / Gas construction is primed to have a decent 2nd half in 2017 and into the 1st half of 2018. Canadian housing starts continue to improve in just about all of the Canadian Provinces. Toronto and Vancouver housing prices continue to increase unabated, prices have increased between 4% & in some cases 9% in 2016 – look for this trend to continue in 2017 and the 1st Q of 2018. New housing starts are projected to be in the 200,000 to 250,000 range for 2017 and 2018. The latest 2017 GDP growth forecast is 2.3%, steady but not that great. The oil patch in Alberta, Canada has experienced a massive decline; Oil prices need to be in the $65 to $75 a barrel to make the Oil from this region of Canada cost-effective.