Global Construction Newsletter – January to March 2021

Executive Summary:

The good news is that a number of successful vaccines have been approved, millions of inoculations are planned to take place in 2021. It could take the best part of six months to a year until a substantial number of jabs are accomplished in the US & worldwide. The once in a lifetime COVID-19 pandemic will not quickly vanish, it will start to gradually start to diminish in the 1st & 2nd Q’s of 2021.

For the best part of 2020 the COVID-19 virus has pounded and slammed the brakes on the global economy and society. More than 180 countries have been impacted by this pandemic. A handful of countries have successfully navigated their way around the pandemic, while the vast majority of countries have significantly struggled with the costly effects of the virus.

Construction Facility Owners, Architects & Engineering firms, Construction Managers, Contractors, Construction Professionals, Workers, Vendors & Suppliers have wrestled with the impact of COVID-19 for most of 2020.

2020 has been an extremely damaging year for the Global Construction sector. Cancelled & delayed projects, thousands of construction professionals & workers have lost their jobs. Unfortunately, this disruption / slowdown will continue well into 2021. That being said, the COVID-19 outlook is still somewhat negative as we move into the 1st Q of 2021, however we are slowly starting to see slow but steady improvements in most country’s construction sectors around the world. The current thinking is that things will be better in 3 to 6 months from now.

The COVID-19 virus has been responsible for anywhere from 30% to 60% of ongoing construction projects around the world to be closed down or delayed since mid-March, we are starting to see most construction work increasingly starting up again as we move into the 1st of Q2021.

Compass International has been working hard in monitoring the impact on the Global Construction Industry to keep you up to date with facts and data that will assist you and your employer weather this once in a lifetime storm and to succeed in 2021.

The UK has reached a “BREXIT” trade agreement with the European Union (EU – 27 remaining countries), just 7 days before it was planned to leave one of the world’s biggest trading blocs.

The bottom line of COVID-19 as of 12/31/2020 to the (7) leading economies:

Number of confirmed cases worldwide has reached more than 80 million

Number of worldwide deaths has exceeded 1.75 million

We have seen 1, 2 & in some cases 3 shut downs in a number countries

  • USA 20 million cases – 350 K deaths
  • China 0.10 million cases – 5 K deaths (remarkable)
  • Japan 0.25 million cases – 3 K deaths
  • Germany 1.65 million cases – 30 K deaths
  • UK 2.30 million cases – 70 K deaths
  • India 10 million cases – 150 K deaths
  • France 2.7 million cases – 65 K deaths

The cost related to project cancelations, mitigation measures, cleaning protocols & personal protection materials, reduced productivity & lost profit opportunities is estimated to be in the $5 billion to $10 billion range.

Impact on Construction 

Residential / General Construction Single Family Homes, Apartments, Warehouses etc. this type of construction represents 53% of overall annual construction activity.

  • Residential Construction Materials – Minor to Minimal increase
  • Residential Construction Labor – Minor to Minimal increase
  • Residential Construction Productivity – Minor to Minimal change
  • Residential Construction In-directs – Minor to Minimal change

Industrial type Construction Refineries, Power Plants, Pharmaceutical, and Government funded infrastructure type facilities this type of construction represents 47% of overall annual construction activity.

  • Industrial Construction Materials – Minor to Minimal change
  • Industrial Construction Labor –increased costs by 5% to 20%
  • Industrial Construction Productivity – reduction in productivity by 5% to 15%
  • Industrial Construction In-directs – increased costs by 5% to 15%

Commercial / Residential Construction includes privately funded Single Family Homes, Apartments, Shopping Malls, Supermarkets, Offices, Hotels, School and Warehouse type projects have not been severely impacted by the COVID 19 pandemic.

Industrial Facilities, Process Plants, Refineries, Manufacturing  / Energy type projects, Government / State funded Civil-Engineering Roads, Bridges / Tunnel type projects and Governmental Institutional & Military type funded projects are a different situation. Smaller work crews, continuous wearing of PPE that requires numerous water breaks / cool down periods, additional bussing requirements from worker parking area to actual site entrances, additional site offices related to a distancing  requirement’s, cleaning protocols & 6’ / 2 meter social distancing & additional site staff to ensure COVID-19 compliance are the root causes of this problem.

Industrial Construction projects will on average take longer to accomplish, a 12 month typical construction schedule will take anywhere from 14 to 15 months to complete post COVID-19.

As we move into 2021, we are possibly moving into a new “normal” that still needs to be fully understood. We believe COVID-19 will have a major impact on how Construction Projects are bid, procured and executed in the foreseeable future.

Current world political & economic risks & some positive issues facing the Global Construction Industry include:

  • A number of effective COVID-19 vaccines have been recently discovered, the challenge now is how can they be rapidly produced & dispensed to tens of millions of people around the world. Is there enough vaccine production facilities to meet this challenge?
  • The eradication of the 2nd & 3rd wave of COVID-19 pandemic in the USA, Europe & other regions of the world.
  • The ongoing confrontational interactions of China with India, Taiwan, Hong Kong, the USA & the countries bordering the South China Sea.
  • The possibility of an all-out trade war between China and the US is still a possibility, as the US pins the blame of COVID-19 on China. It would appear that we are entering a new Cold War between the US and China.
  • Joe Biden is set to become the 46th US President on 20th January, how his Presidency will impact future construction is still to be determined.
  • BREXIT has finally been completed with an agreement between the UK and the European Union, this is now settled and is seen as a positive development for Europe.
  • North Korea continues to be a wild card, how will the new US administration deal with this problem?
  • There remains a possibility of a prolonged Global Recession.
  • The loss of construction worker productivity on Industrial Construction projects related to social distancing, new safety rules & the need for personal protection, remain an issue TBD.
  • Low oil prices & a potential scarcity of future CAPEX funding & investment.

If the majority of these concerns can be resolved or put to rest, then the Global Construction Industry has an excellent chance to grow & prosper in the next 2 to 5 years particularly in some of the 2nd & 3rd world developing economies of South East Asia, Africa & South America. However, the current global war on the COVID-19 needs to be won before this can be realized & this might take another 6 or more months before this happens.

1st Q of 2021 Construction Outlook for Major Countries:

Countries 1sth Q 2021 % GDP Growth 1st Q 2021 Inflation % 1st Q 2010 Unemployment % Comments on Construction in 1st Q of 2021 

Future Spending Activity

USA 1.7 to 2.5 1.2 – 1.6 5.5 – 6.5 Unemployment is decreasing rather rapidly. The 1st Q of 2021 will continue to be challenging as the US construction sector tries to come to terms with the pandemic & the new normal. Engineering & Architectural firms are reporting a significant slowdown of RFQ’s / new orders as we move into 2021.The bad news is that COVID-19 confirmed cases are rapidly increasing. The good news is that a number of successful vaccines are being dispensed
CANADA 1.7 to 2.1 0.6 – 0.8 8 – 9 A slow advance in consumer and business confidence is expected in the 1st Q of 2021, look for the effects of COVID-19 to start to receded. Continuing low oil prices will negatively impact Canada’s oil patch. New RFQ’s / Bidding opportunities on commercial type projects should present themselves as we move further into 2021.
BRAZIL Minus 1.3% to Minus 2.5% 4.5 – 5.5 12 – 14 A laissez-faire response to the COVID-19 pandemic aided business & the economy but caused a high infection rate & many fatalities. Brazil is now has the 3rd largest number of COVID-19 deaths worldwide. The full scale of the economic impact of the deadly COVID-19 on Brazil is still TBD. Regrettably, COVID-19 has the potential for all Brazilian future or ongoing construction projects to be delayed, deferred or cancelled. Look for construction unemployment to increase in the next month or two. 2021 construction activity looks to be down from pre-COVID-19 levels. A/E & CM firms are reporting a sizable drop off in RFQ’s / Bidding opportunities / new orders as we move into the 1st Q of 2021. The latest thinking is that it will take at least 6 months to see any economic improvement .
UNITED KINGDOM 0.2% to 0.4% 0.8 – 1.1 4.6 – 5.5 BREXIT terms & conditions have finally been completed with a deal between the UK and EU. Once the COVID-19 pandemic is resolved, in say 3 to 6 months, the UK economy & construction sector could be in a growth spurt. The pound sterling is starting to strengthen against the US Dollar. 
GERMANY 0.2% to 0.4% 0.2 – 0.4 4.3 – 5.5 German economic & construction activity once the COVID-19 virus is alleviated is expected to improve, however this might take another 6 to 9 months. A lot of industry experts believe BREXIT will not be a good outcome for the German economy & construction sector, time will tell.
FRANCE 0.2% to 0.4% 0.2 – 0.4 8.2 – 8.5 France & the rest of the EU have reached agreement on the terms of a deal on BREXIT. This could have ramifications on the French economy & construction sector. France has struggled with high unemployment since 2008. COVID-19 is an additional challenge. The full scale of the economic impact of the deadly COVID-19 on France is still TBD. This virus couldn’t have come at a worse time as France has struggled economically for the last 10 years. Engineering & Architectural firms are reporting a significant fall off of RFQ’s / new orders as we move into 2021. Many industry experts believe BREXIT will not be a positive result for the French economy & construction sector, they believe the UK will be more competitive than France, again only time will tell.
RUSSIA Minus 1% to Minus 2% 4.3 – 4.8 6.2- 6.7 Russia announced in August that it had produced a COVID-19 vaccine (Sputnik COVID-19 vaccine), that went into full production in September. Russia is starting to see a 2nd wave of COVID-19 cases, it is currently reporting over 3 million confirmed cases and more than 25,000 deaths. Russia has closed its borders to foreigners in recent weeks. A severe fall in the Russian Ruble after the dramatic oil price drop is still TBD. The virus has the potential for all Russian future or ongoing construction projects to be delayed or the worst case cancelled. 
JAPAN 0.1% to 0.3% 0.1 – 0.3 2.6 – 3.3 Japan has withstood the COVID-19 reasonably well with just over 200,000 confirmed cases and close to 3,000 deaths. The Japanese economy & construction sector is still underperforming. The 2020 Olympic games have been cancelled hopefully until mid-2021
CHINA 2.9 to 4.9 2.5 – 2.9 3.8 – 4.2 China’s economy and construction sector has recovered quickly, painstaking lockdowns and population tracing policies checked the spread of the COVID-19 virus. The Chinese economy & construction sectors are starting to see decent growth again, not as good as pre-COVID-19 levels, but still positive. The ramifications of the global economic impact of the deadly Coronavirus Pandemic is still TBD. Many US / European & Japanese manufacturing companies have plans to relocate their production facilities out of China, stay tuned.
INDIA 2.5 – 2.9 5.8 – 6.7 6.3 – 6.6 The potential of border hostilities with China is a major concern. India continues to purchase advanced fighter jets & weapon systems, which is not a good sign. India has been hard hit with more than 10 million confirmed cases of COVID-19. Many Indian planned or ongoing construction projects need to be reevaluated, delayed or in the worst case canceled. Prime Minister Narendra Modi has earmarked a $2 + billion fund to mitigate the effects of the Coronavirus Pandemic on the Indian population & industry.

1st Q 2021 Prices at a Glance:

  • Forecast Cost of a barrel of Crude Oil $42 – $49
  • Forecast of Euro / US $ Exchange Rate 1.14 – 1.21
  • Forecast of UK Pound / US $ Exchange Rate $1.33 – 1.38
  • Forecast of Copper per pound $2.95 – $3.10
  • Forecast of Aluminum per pound $0.95 – $1.05
  • Forecast of Gold per Ounce $1,870 – $2,070
  • US Construction Material Inflation (Basket of 10 construction materials) 0.8% – 1.6%

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