The CoreLogic July Market Movement Report uses Cordell construction project data to assess results in the construction market for the first quarter of 2018. Results show recovery in the mining sector, and a lingering construction in residential, despite signs of slowed capital growth in major dwelling markets.
In Western Australia, the March quarter saw $3.0 billion in new mining projects added to the pipeline of construction, up from $1.3 billion in the December quarter. The value of mining projects was largely lifted through a $1.2 billion iron ore mine, the Eliwana Iron Ore Project.
According to CoreLogic commercial research analyst Eliza Owen, a rebound in mining- related construction activity has coincided with a rebound in the non-rural commodity price index. Between March 2016 and March 2018, the non-rural commodity price index rose 4.7%, coinciding with a 47% rise in the value of new development applications captured by CoreLogic.
Iron ore had a particularly strong recovery following its price collapse between 2012 and 2015. Since bottoming out at $0.56 AUD in December 2015, the price has recovered 51.8%.
Eliza Owen said, “Ultimately, renewed iron-ore related construction in Western Australia is supported by improved demand from China, where iron ore is used to make steel. Data from the World Steel Association suggests that China reached unprecedented steel production in April 2018, of 76.7 million tonnes over the month. This figure is 4.8% higher than 12 months before.”
In terms of work under construction, the March 2018 quarter saw 9,295 projects under construction across Australia, up from 9,152 projects in the December 2017 quarter. The number of projects under construction is -5.1%, below the 9,797 projects underway in March 2017.
The highest construction value gains over the year, in terms of year on year change in the value of projects under construction, were in residential builds (+ $117 billion), road infrastructure (+ $43.2 billion) and administration facilities (+ $23 billion). The value of residential work under construction appears to have ‘scaled up’ in the March 2018 quarter, with fewer projects at a much higher value under construction.
Discounting mining, where the works related to the Gorgon Gas Project is maintaining inflated values in mining construction, Sydney and Melbourne currently have the most construction activity in terms of the value of work being done. At March 2018, Sydney had $46.2 billion worth of work underway, and Melbourne saw projects worth $44.6 billion under construction.
Eliza Owen said, “Across each of the states and territories, major government infrastructure investment, the implementation of residential projects and the rise of select non-residential real estate, are all themes that are generally reflected in the construction landscapes.