Global construction consultant Linesight released its Q2 Canadian Country Commodity Report.
The report notes encouraging growth as Canada’s Real GDP exceeded expectations and job growth continued in Q1 2023. While a decline in the residential sector contributed to a contraction in the construction industry, the industrial sector is poised for growth. The Canadian government’s commitment to establish Canada as an industrial hub and investment in EVs, green hydrogen, metals and materials processing will help drive growth in the energy and high-tech industrial sectors. However, risks remain with ongoing inflation, high interest rates, and labor shortages continuing to impact the industry.
Patrick Ryan, Executive Vice President for the Americas at Linesight, says, “The signs are promising for the Canadian economy overall, but the construction industry faces lingering challenges. Labor shortages – due to growing demand for healthcare, infrastructure, data centers, and life sciences – are still impacting project delivery and budget. Multiple sectors are expanding in Canada, all of which will put increasing demand on materials. For example, we’re seeing two major gigafactories going up in Southern Ontario soon, and the government’s investments in healthcare, life sciences, and infrastructure will all be materials intensive.”
The data in the report suggests:
- The construction industry is expected to shrink by 5.2% in 2023 as the residential sector has declined more than expected. Regardless, construction is likely to grow by 2.7% between 2025 and 2027 thanks to investment in the industrial, energy, and transportation sectors.
- Lumber prices are stable this year after two years of high volatility. Prices picked up due to the wildfires in June of 2023. Though prices may appreciate slightly in the coming months, the trend in coming quarters looks to be one of weakness due to the housing downturn.
- Copper prices have dropped 5.5% in Q2 2023 and stabilized but are likely to be volatile for the next two quarters, influenced by high interest rates and weakening residential construction on one side, and investment in electric vehicles and renewable energy on the other.
- Steel rebar prices are down from 2022 highs and likely to continue edging downwards in the months to come. Demand for steel will be driven by significant infrastructure investment, with upward pressure limited thanks to cheaper steel imports and easing production costs.
- Cement costs have continued to increase due to stricter environmental regulations but will likely drop in the coming quarters. Prices are rising at a slower pace than before and an awaited drop in production costs and construction output may help prices decline.
Looking to the report’s outline of sector-specific trends, the data center sector in Canada has experienced remarkable growth, driven by increasing demand for cloud computing, IoT favorable climatic conditions, and a low risk profile. Currently, there are numerous data center projects in the pipeline, totaling a value of over US$7.4bn, with a significant concentration in the Ontario and Quebec regions.
Despite economic challenges, the industrial construction sector has shown positive trends in investments and building permits since the start of 2023. It is projected to achieve a growth rate of 15.5% in 2023. The sector’s output will be bolstered by investments in Electric Vehicle (EV) markets and the government's ambition to establish the country as an industrial hub.
Canada is an established leader in the renewable energy market, benefiting from abundant natural resources and in 2022, the wind, solar, and energy storage sector experienced substantial growth, expanding by 10.5%. Canada aims for net zero emissions by 2050.
