Feb 22, 2016

Strong growth for road sector

Strong growth for road sector

Screenshot003-1Road building has been flagged as one of the strongest growth markets in the construction industry, with the value of work nationally forecast to rise more than 30 per cent over three years.

In Queensland it is expected to increase 44 per cent from 2014/15 figures, taking the value of road construction works in the state to about $4.9 billion by 2017/18, according to a senior BIS Shrapnel analyst.

BIS Shrapnel senior manager – infrastructure and mining Adrian Hart said Australian road construction activity had fallen by more than 20 per cent in real terms since its peak in 2011/12, amplifying the downturn in overall engineering construction work.

But he described the outlook for the sector is highly positive — in contrast to the overall construction market.

Mr Hart was commenting after the recent release of BIS Shrapnel’s Road Construction in Australia 2015 to 2030 report.

In Queensland, he said road construction was the second largest engineering construction market behind mining and heavy industry construction, with $3.2 billion in work done in 2014/15 compared to $10.8 billion nationally.

While the overall engineering construction market in Queensland would continue to fall sharply as LNG-related projects moved to completion, road construction was expected to recover strongly.

“As with Australia, road construction is expected to regain its No. 1 ranking in Queensland later this decade, overtaking mining and heavy industry construction by 2019, and making up nearly 30 per cent of the overall engineering construction market in the state (from a low share of just 10 per cent in 2014,” he said.

BIS Shrapnel’s report shows road construction in Queensland has been volatile over the past five years, owing to major toll road construction, two widespread floods and the subsequent rebuilding work.

The volume of road construction halved from a 2011/12 peak of $6.5 billion to $3.2 billion in construction work done in 2014/15.

The decline over this period was mainly due to the completion of major projects, the winding down of cyclone and flood reconstruction works, and the decline of mining investment resulting in a fall in mining access road construction.

Queensland road construction is forecast to rise by 44 per cent to 2017/18, with about four-fifths of the growth expected to come from the highways and arterials sector, driven by major projects.

The largest projects in the pipeline include the Bruce Highway upgrade projects, Warrego Highway upgrade projects (which includes the Toowoomba Second Range Crossing project) and Gateway Motorway Upgrade North.

Nationwide BIS expects road construction to surpass mining and heavy industry construction to become the largest single engineering construction segment by 2017/18.

This would be the first time it has held that No. 1 ranking since 2004/05.

But Mr Hart warned that the sector faced its fair share of challenges and risks.

These included a wide variability in activity forecast by state and by type of road. Growth in construction costs may reaccelerate again as construction work restabilised and if input prices (particularly for oil and oil products such as fuel) increased, reducing the real impact of increased road funding.

As highlighted by Infrastructure Australia’s Infrastructure Plan released last week, Mr Hart said there was a need to secure a more sustainable funding mechanism for roads over the long term given the inability of the existing fuel excise regime to keep up with road construction and maintenance requirements.

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