With multi-billion dollar projects such as the Perdaman Collie Urea Plant and the Penola Pulp Mill in South Australia come online, tangible signs of the long awaited recovery in industrial construction activity in Australia are now evident.
In calendar 2011, the Construction Forecasting Council (CFC) expects the value of work done in the sector to increase by 7.3% from $3.371 billion to $3.617 billion. By financial year 2012/13, the CFC predicts, activity will have reached $4.071 billion.
The CFC is not alone. According to the May edition of the Construction Outlook report prepared by Australian Industry Group (AIG) and the Australian Constructors Association, survey respondents are bullish about the prospects for the sector. Whilst activity levels in the ‘other industrial’ sector, which excludes, mining, oil, gas and chemical plants, were expected to remain virtually unchanged this year, the value of work in the sector was expected to grow by more than fifteen percent in 2012. Meanwhile, mining, mineral and processing plants were expected to grow by fifteen percent in both this year and next; oil and processing facilities by more than twenty percent each year; and chemical or petro-chemical plants were expected to grow by just over five percent in each year.
In the immediate term, data relating to approvals and construction starts is not encouraging. In the year to August, construction information service provider BCI Australia expects the value of construction starts in the sector will be down by 12%. Furthermore, in the twelve months to May, the total value of industrial buildings approved amounted to $3.234 billion, according to the Australian Bureau of Statistics (ABS). Set against current activity levels ($3.371 billion), this indicates that new work is not even coming in as fast as existing work is being done.
Even in the approval data, however, there are positives: at 41.435 billion, the value of approvals in the five months to May this year was well up on the corresponding figure for the same period last year ($968 million).
Moreover, the imminent starts in projects like Perdaman and Penola are the best indicator of where the industry is at. Perdaman, valued at $2.96 billion, has moved into the construction phase. Penola, worth around $2 billion, is at the tender calling stage.
And let’s not forget the $2 billion Gunns Pulp Mill in Tasmania, which has not been included in CFC forecasts. If Gunns does eventually go ahead, the forecasts mentioned above may well prove to be too conservative.
Significant statewide developments
Perhaps surprisingly, given that Perdaman and Penola are located in Western Australia and South Australia respectively, the expected recovery is expected to be concentrated in New South Wales and Queensland, with activity expected to decline in WA and SA whilst remaining flat in Victoria.
According to CFC forecasts:
• Helped along by work on the Southern Distribution Business Park in Goulburn ($1 billion), activity in New South Wales is set to surge from $686.3 million to $1.045 billion this year.
Beyond that, from late 2012 onward, work on the $2 billion Sydney Business Park will help underpin modest but respectable growth, with activity reaching $1.309 billion in 2014/15.
• Work on the Gladstone Steelmaking Facility ($1.3 billion) and the first stage of the Wiggins Island Coal Terminal ($1 billion) is expected to propel the value of work done in Queensland to $1.020 billion by 2012/13 – well up on the $611.7 million recorded last year.
• Despite the anticipated boost from the pulp mill, activity in South Australia is expected to decline from $309.1 million last year to $242.7 million in calendar 2011 before bottoming out at $214.2 million 2103/14.
• Likewise, despite Perdaman, the value of work in WA will plummet from $469.8 million to $377.6 million this year and remain flat until an expected pickup in 2013/14.
• Whilst flat activity is expected in absence of Gunns, Tasmania will see a gigantic surge in activity if the pulp mill does eventually go ahead.