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A Hot Global Context
3. We're operating in a hot global context
We cannot look at the New Zealand construction industry and supply in isolation from the global context. Freight has been our biggest issue to date, but we have been in a somewhat sheltered position in that demand internationally has been subdued due to the Covid crisis playing out in the major markets of USA, UK, Europe, China and India.
With vaccination uptake levels reaching critical milestones and nations opening back up from lockdowns, we are seeing a surge in construction demand globally. The US is working on the basis of a 15-year housing boom, and both China and India expect construction demand to grow by around 12-13%.
The issue this creates is that New Zealand is a small market in the global context, in fact just 0.1% of the global construction industry in 2020.
The global construction industry has been forecast to grow at a CAGR (cumulative average growth rate) of 3.5% during 2021-2026 to $14.4 trillion (USD) by 2026*. This annual growth is 28 times the size of the total NZ construction industry, every year, for the next 4 years.
As these nations come back online, we’ll be competing for product and shipping availability.
EXPERIENCED SIGNIFICANT INCREASE IN CONSTRUCTION WORKLOAD TO THE END OF Q1 2021*
| NEW ZEALAND |
| AUSTRALIA |
| EGYPT |
EXPECT A SIGNIFICANT INCREASE IN CONSTRUCTION WORKLOAD NEXT 12 MONTHS (TO Q1 2022*)
| NEW ZEALAND | NETHERLANDS |
| AUSTRALIA | SWITZERLAND |
| EGYPT | POLAND |
| CHINA | GREECE |
| INDIA | SAUDI ARABIA |
| USA | SRI LANKA |
| CANADA | NIGERIA |
| UK | PHILIPPINES |
| IRELAND | BRAZIL |
*Source: RICS Q2 2021 Global Construction Monitor – Expected workloads next 12 months
Freight will likely continue to be tight for the next 12 to 18 months as shipping companies shift their focus elsewhere, making it harder to achieve increased imports to meet demand.
The recent 2021 Q1 report from Rider Levett Bucknall states: “We do not expect that supply issues and shipping costs will revert to some sort of normality for the next 12 to 18 months once the effects of the pandemic reduce. As governments stimulate other economies and as borders open, we expect that commodity prices, however, will remain high.”
What this all points to is that New Zealand is a small part of a larger global market that is struggling to cope with forecast growth. In June Reuters reported that the US has the highest number of housing consents issued that are still yet to be built since 1999. There is a huge amount of pressure in the US market alone. New Zealand will struggle to get supply in the face of this, let alone shipping – unless we can start to protect some supply and shipping capacity.
