Things we will see in the 3rd Q of 2021:
USA, CANADA & MEXICO are forecast to see nominal GDP growth in the range of 3.5% to 4.8%:
The USA, Canada & Mexico are all slowly recovering from the pandemic.
In the USA, research of the impact of COVID-19 to project budgets & schedules related to industrial plant developments indicate that costs will increase by 5% to 10% from pre-COVID-19 levels.
The main reason we are seeing cost increases on Industrial Construction projects is due to the effect on direct and in-direct field construction labor caused by delays initiated by wearing PP all day, smaller crews, social distancing, cleaning routines, bussing, and site check-in routines.
The increased cost impact on a $25 million Industrial (200,000 man-hours) Project could be in the 5% to 7% range, without taking into account the significant spike in construction materials.
This will not be the case with Commercial / Residential type construction, we anticipate that this construction category will experience a minimal change in productivity, however, these facilities will be impacted by the increased costs by skyrocketing construction materials.
Increased construction materials prices is a major problem, brought on by pent up demand after the Covid slowdown and the current USA housing boom.
- Concrete (Ready Mix) + 5% in the last 8 weeks.
- Rebar + 15% to 45%% in the last 3 months.
- Formwork + 15% to 22% in the last 8 weeks.
- Bricks / Concrete Blocks + 7% in the last 10 weeks.
- Lumber / Plywood / OBS + 85% in last 3 months, we are seeing some prices starting to trend downwards.
- Pipe & Fittings (CS / SS) + 16% to 22% in the last 2 months.
- PVC Pipe & Fittings + 4% in the last 8 weeks.
- Copper materials / Electrical cable + 20% in the last 3 months.
There are indications that the COVID-19 epidemic is starting to wane, however we are not out of the woods yet, a 3rd COVID wave is a distinct possibility in certain US / Mexican states & Canadian provinces.
At least an additional 250,000 or more extra construction workers will be needed in the 2nd half of 2021, to keep pace with the booming single-family homes & apartment-related construction that is really resonating across the vast majority of US states. Extremely low mortgage rates, pent-up demand & a flight to the suburbs is fueling this housing expansion.
A full US economic recovery will take at least 6 to 12 months to return to pre-COVID-19 levels, the good news is that the economies of the USA, CANADA & MEXICO are starting to see growth as we move into 2nd half of 2021. In the USA, all of US States are now allowing construction work to proceed. Safety & worker protection has really become an important issue on construction sites in the last year.
Oil & Gas Owners / Operating Companies are taking a second look at their 2021 CAPEX budgets, with the recent strong rise in oil prices, a number of CAPEX-related Petro-Chemical, Energy & Power projects could move forward in the 3rd & 4th Q of 2021.
The majority of Refinery, Power, Manufacturing Pharmaceutical, Food Production & Owner related companies are including clauses / contractual language in their construction contracts / Requests for Proposal (RFP’s) to minimize the spread of COVID-19 within their production sites/campuses, most of these contractual requirements will impact construction productivity, they include:
• Utilizing social distancing 2 meter / 6 foot rules on construction site.
• Construction staff & workers are required to wear masks, in some cases gloves & goggles.
• Extensive cleaning measures / protocols required by Owners, some Owners are calling for dedicated COVID cleaning crews.
• Additional hiring of COVID mitigation/ testing site staff, requested by Owner.
• Increased field in-directs (Site Offices / Lunch – Change Areas & additional support labor).
• Smaller, spread out work crews, dictated by Owners.
• Required cool down breaks in morning & afternoon due to the permanent wearing of masks, gloves & safety glasses in high temperature locations.
Unfortunately, COVID has put a lot of small / mid-sized A/E’s, contractors, sub-contractors & vendors out of business, cash flow problems & lack of work is the reason for this situation.
The Canadian economy and construction sector was severely impacted by the COVID-19 virus, this and low oil demand / deteriorating oil prices. However, with the recent spike in oil prices is somewhat of good news for the Canadian oil patch.
The COVID-19 virus will hopefully fade away in the next 6 to 12 months, Canada is currently experiencing a housing boom, and the rest of the construction sector remain flat for the next 3 to 9 months.
Mexico has seen over 2 million confirmed COVID cases & 200,000 related deaths due to the virus, however recent reports indicated the number of deaths is closer to 350,000.
Like its two northern neighbors, the Mexican economy and construction sector struggled with the COVID-19 pandemic. This together with low oil prices in 2020 stymied the Mexican economy and construction sector. The COVID-19 pandemic will eventually be contained, this may take at least 6 months to achieve. $60 to $75 a barrel oil prices are forecast to in place in 2021, which is beneficial to the Mexican economy & its construction sector. A sustained economic recovery will take anywhere from 6 months to 12 months to achieve.
Western & Eastern Europe is forecast to see minimal or negative GDP growth in the 2nd half of 2021.
The protracted & disorganized rollout of vaccinations is a serious problem in many European countries.
Europe experiencing 2nd & 3rd wave and COVID remains a serious problem and the new Indian strain presents additional challenges.
The UK has so far seen close to 4.3 million cases of COVID & more than 126,000 deaths. Germany has seen more than 2.7 million COVID cases, resulting in close to 75,000 fatalities. Spain has experienced more than 3.2 million confirmed cases of COVID & has lost close to 75,000 citizens.
Poland & the Czech Republic are dealing with a 3rd wave of COVID, other countries including Germany, Italy, Portugal & France continue to struggle with the COVID virus. L,ook for this to continue for the next 3 to 6 months. The European Union’s vaccination rollout is going so badly that both China & Russia are now approaching individual countries to sell their vaccines.
However, we are starting to see signs that the COVID-19 epidemic is starting to decline in the UK, Sweden, Norway & Denmark.
How the new Brexit trade agreement will impact European construction is still TBD, the UK & the European Union continue to squabble over the terms & conditions of the so called agreement, some industry experts believe the UK will benefit at the expense of both France and Germany.
The COVID-19 virus has negatively impacted the construction sectors of Germany, France, Italy, Spain & the UK – the latest thinking is that these construction sectors will start to see an improvement in the 2nd half of 2021.
Construction work has now gradually resumed on many construction sites across Europe. Industrial construction worker productivity is forecast to be reduced due to mandated social distancing and new safety rules.
In the UK, the housing sector is expected to weather the COVID-19 storm, however new retail construction, hotels and office construction will be in the doldrums for at least the next 12 to 18 months. Germany, France and Italy are expected to see a similar situation.
Lots of European construction related organization are looking future Government funded infrastructure investment in the next couple of months to help in weathering the downturn brought on by the pandemic.
A number European of large and mid-sized construction related organizations have reduced home office staff and site based positions, the current view is that this could amount to between 15% and 25% of current staff levels.
Sweden has been the only major European country not to impose a shut down or social distancing. Worker absence has been somewhat higher, delays of various construction materials have caused some delays, however at most it has been minor nuisance at a few construction sites. Recent reports from Sweden suggest in hindsight that lockdowns and social distancing should have been introduced like the vast majority of other countries.
The European construction sector has a reasonable chance to grow & succeed in the next 6 to 12 months & return to pre-COVID-19 levels if the virus vaccination program can be rapidly implemented to its 350 million citizens.