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Contractor (Perspectives 2015) The NZ Concrete Industry - Gaining Momentum in 2015

05 Jan 2015

Rob Gaimster
Cement & Concrete Association of New Zealand (CCANZ)

Guided by encouraging trends over the past year or so, along with recent high level government forecasts of stable short-term growth, 2015 looks set to provide a positive operating environment for the construction sector.

From a concrete industry perspective, although 2015 will see preparations ramp-up for a changing cement supply landscape in New Zealand along with updated regulations that require a degree of adjustment, the generally positive outlook for the wider construction sector will have a flow-on effect that off-sets the difficulties of recent years and creates opportunities.

SETTING THE SCENE IN 2014

When attempting to gain some sort of perspective on the year ahead it goes without saying that the previous 12 months offer the most valuable indications.

In respects the 2014 business climate was similar to that of 2013. Memories of the world’s recent economic woes lingered, the Canterbury rebuild had only just started to emerge out of the ground, while a high New Zealand dollar and declining ready mixed concrete production in some regions were felt to a degree.

However, if the situation had previously been described as “subdued”, then it is reasonably safe to now start using more positive terms.

The concrete and wider construction market has recently given us cause for optimism. The general air of growing confidence stems from the upwards trend in the main construction sector indicators.

Consents issued and work put-in-place across residential and non-residential areas both demonstrated promising trajectories. A nationwide increase in ready mixed concrete volumes has helped alleviate much of the pressure that had built up over the past five years.

Auckland and Canterbury in particular are enjoying very encouraging levels of concrete production. In Auckland, the Waterview Tunnels are indicative of the construction activity across our biggest city, while the 900 m3 concrete pour in March at The Terrace project in the Christchurch CBD is an excellent example of the post-earthquake rebuild gathering pace in 2014.

DEMONSTRATING DRIVE IN 2015

Over recent months economic and construction industry commentators have expressed mostly positive outlooks for 2015.

Although new residential dwelling consent data has been described as “patchy”, in general terms the residential sector is showing a strong recovery.

Similarly, commercial building investment looks to remain healthy despite recent hikes in the official cash rate. Concerns around the existing building stock’s seismic resilience also appear to have waned as understanding of requirements grows.

Civil construction will be driven by a number of major roading projects in the main centres and beyond, including the Christchurch Motorways Project, Wellington’s Northern Corridor and the completion of the Western Ring Route in Auckland.

NATIONAL CONSTRUCTION PIPELINE REPORT

One of the most explicit predictions that 2015, and immediately beyond, will yield positive dividends for the construction sector is the recently updated National Construction Pipeline from the New Zealand Building and Construction Productivity Partnership - buildingvalue.co.nz.

The report draws on updated data from Statistics NZ, projections by Pacifecon NZ Ltd based on their comprehensive database of non-residential building projects, and forecasts by BRANZ covering both residential and non-residential building.

One of the report’s key findings is that construction activity is forecast to grow across New Zealand, with a minimum 10% increase expected every year to 2017, peaking in 2016 (2015 in Canterbury). 

The report highlights that this growth is principally driven by Auckland residential housing demand and the Canterbury rebuild, although growth in the latter is predicted to be lower than previously forecast.

DEVELOPMENTS AND OPPORTUNITIES IN 2015

In 2015 the wider concrete industry looks set to enjoy increased production in most regions, as well as take advantage of emerging opportunities to grow infrastructure and residential market share. 
There will also be some interesting developments around cement supply and the update of several key industry Standards.

Cement Supply Landscape
Over the past several years the cement supply market in New Zealand has changed somewhat as product from other than traditional sources has become more common.

This trend is set to continue in 2105 with Holcim (New Zealand) Limited recently announcing it was moving to a business strategy of importing and distributing bulk cement for supply, and that this would mean a move out of manufacturing.

The company has all the final approvals to go ahead with its investment of more than $100 million to build two 30 000 tonne import terminals, one in Timaru and one in Auckland [Waitemata]. The timeframe for having both new terminals operational is planned for the second half of 2016.

The transition to imported cement will replace local production at the company’s Westport cement plant, which will close once the two import terminals are fully operational.


Updated Regulations
Updated versions of key concrete related Standards will come online during 2015. These will ensure the continued use of concrete and concrete products with confidence.

NZS 3122 Specification for Portland and blended cements (General and special purpose) will be amended to focus on sampling and testing for all cement used in New Zealand, while NZS 3101 Concrete structures standard will be amended to incorporate changes that follow-on from the Canterbury Earthquakes Royal Commission’s recommendations.

Concrete Opportunities
As mentioned above, the optimistic forecasts for construction over 2015 are built to a large extent on infrastructure expenditure (specifically roading), and the urgent need for housing in Auckland. Both these areas of demand offer an opportunity to utilise the inherent benefits of concrete and in turn grow market share.

The Roads of National Significance, more so those utilising Public Private Partnerships (PPP), are ideally suited for decision makers to embrace innovative and long-lasting concrete-based roading techniques that, as confirmed by CCANZ commissioned Infometric’s analysis, offer cost savings of around 25% over a 30 year service life compared to asphalt.

Current social trends (aging population) and economic conditions (high property prices and a scarcity of land for development) are leading us towards more sustainable and affordable medium density multi-storey developments in our cities. This places a premium on appropriate material selection to achieve optimum fire resistance and sound attenuation, both areas where concrete will have a role to play.

2016 AND BEYOND

Although the boom and bust nature of the construction sector can be unsettling, the upturn currently being experienced, and which is predicted to continue for several years, is most welcome.

However, if those within the construction sector and their clients are able to utilises the “good times” to develop long-term strategies that aide planning and co-ordination around project scheduling and skills / capital investment, then perhaps the peaks and troughs of the boom bust cycle will be less pronounced to enable sustainable growth over the long-term. 

Article appeared in Contractor - Perspectives 2015 magazine.