Sunday, 20 January 2013

Canada Infrastructure Market Report Q1 2013

BMI View: Canada remains our developed market construction sector outperformer. Despite the potential
threat from an overheating housing market, commodity price weakness and an underperforming
commercial building segment, we believe the country''s construction industry growth will outperform its
developed market peers over the near term. Following a deceleration in construction industry real growth
in 2012, we expect a pickup in 2013 (3.8% year-on-year in real terms). This view id supported by the
country''s infrastructure sector, due to the high number of rail and electricity projects in the pipeline.
Data for the first eight months of 2012 is in line with our belief that construction growth slowed as the year
progressed, from the 4.1% year-on-year (y-o-y) real growth seen in 2011. As a result, we are maintaining
our estimated 3.2% y-o-y growth for full-year 2012. Despite the sector moving into 2013 with less
momentum than in previous years, we expect growth to pick up, with a number of high value infrastructure
projects due to enter the construction phase. We also expect the non-residential segment, which weighed on
growth over 2012, to pick up as a result of industry projects linked to natural resource extraction and
processing. However, the housing segment will continue to decelerate slowly.

The greatest risks to our outlook come from a sharper-than-expected decline in the housing sector, slowing
demand and falling prices in the commodity sector, which are forcing developers to stall new capital
investment, thereby impacting supporting infrastructure and industrial projects.

Infrastructure Foundation For GrowthInfrastructure remains a fundamental element of Canada''s
construction industry growth, with a project pipeline in excess of US$120bn. Whilst we envisage belowtrend
growth in 2013 and 2014, there is significant upside to our view if projects are able to bypass
regulatory red tape quickly.

One of the strongest sub-sectors over our 10-year forecast period will be railways, where a project pipeline
worth US$36bn will drive annual average industry value real growth to 4.3% between 2013 and 2021. This
growth will be driven primarily by urban rail projects, including the CAD8.2bn Eglinton Crosstown Light
Rail Transit project, the US$2.6bn Toronto Subway Spadina line expansion, the US$2.1bn Ottawa Light
Rail project and the US$1.8bn Edmonton Light Rail project.

The biggest upside potential to our forecast is from a couple of freight rail projects, which are far from
certain. In November 2012, a CAD8.6bn railway project to transport crude from Alberta''s oil sands to
Alaska moved forward. The project has support from First Nations groups and is seeking financing to
produce a feasibility study. In October 2012, it was reported that the CAD5bn Cóte Nord rail project in
Quebec would submit an environmental impact statement. The 800km railway connecting the Port of Sept-
Iles on the Gulf of St. Lawrence to the Schefferville mining region in Quebec is being developed by CN
Rail, La Caisse and five mining companies.

Original Post:

No comments:

Post a Comment