This is the tenth in a series of export sector surveys authored by State officers supporting the President’s National Export Initiative (NEI) and the Secretary’s Economic Statecraft program. The NEI strategy and ways to strengthen interagency collaboration are outlined. This survey covers construction equipment. The expected 47 percent growth in the Canadian construction equipment market over the next 4 years represents a potential of $2.2 billion in exports to Ontario for US construction equipment manufacturers, predominantly in the residential and nonresidential construction sectors. The Ontario market is highly dependent on the importation of construction equipment and the main competitors to US manufacturers are Japanese, Swedish, German and Chinese construction equipment manufacturers. With the advantages of geographic proximity, NAFTA, and similar business practices, US firms are well equipped to increase exports in the Ontario and Canadian Market.
Canada’s construction industry employs close to 1.2 million, accounts for approximately seven percent of Canada’s annual GDP, and buys goods and services in every region of the country and every sector of the economy. There are four general categories of construction work: New Home Building and Renovation (single and multi-family); Heavy Industrial; Commercial and Institutional; and Civil Engineering. The six main Canadian urban areas of Toronto, Montreal, Vancouver, Edmonton, Calgary, and Ottawa should continue to have the highest housing starts. The housing market in central Ontario is the strongest across Canada due to arriving immigrants. Canadian housing starts are estimated at 175,000 in 2011, 190,000 in 2012, and 210,000 in 2013. Ontario takes the lead in Industrial, Commercial, and Institutional (ICI) construction at a forecasted US$15.8 billion in 2011 (33 percent share of a projected US$47.6 billion market); while Alberta dominates Engineering construction at a forecast of US$33.6 billion in 2011 (33.4 percent share of a projected US$100.6 billion market).
High commodity prices are driving large scale mining projects across Canada. In addition, large scale projects such as Waterfront Toronto, the 2015 Pan Am Games and expansion of transportation infrastructure will drive demand for construction equipment in the province of Ontario. Residential housing growth with a trend towards large scale multi-family dwellings will also continue to drive demand for construction equipment in Ontario. Industry groups forecast both residential and commercial construction starts to continue growth through 2019. While most, but not all, of the projects related to commodities are located in mining areas outside of Ontario, industry analysts continue to forecast strong growth in construction in Ontario in the areas of commercial and residential construction. Industry analysts expect consistent growth in residential construction starts through 2019. Commercial construction starts have continued to grow in 2011 with strong growth projected through 2019. (Construction sector council, www.constructionforecasts.ca)
The continuing investment in construction projects will in turn spur demand for construction equipment. The Canadian market imported $4.725 billion in construction equipment in 2010. U.S. exports dominated the market with $3.082 billion in exports, a 65% share of all imports to Canada. U.S. exports have rebounded from a steep drop in 2009. In 2008, U.S. exports peaked with over $3.969 billion in exports dropping to just over $2.222 billion in 2009. However industry groups are reporting that demand has grown even stronger in the first half of 2011 with U.S. exports of construction equipment up 48% over the first half of 2010.
The main competitors with U.S. businesses are from Japanese, German and Swedish companies. The Japanese have the second largest piece of the Canadian market with $560 million in exports in 2010, while German companies exported $184 million and Sweden $169 million. While Chinese construction equipment manufacturers have a relatively small piece of the Canadian market, they posted the largest gain from 2009 to 2010 increasing exports by 62%.
Within Ontario, the trend with regards to construction equipment imports mirrors the overall Canadian numbers. U.S. construction equipment exports dominate the Ontario market with $1.113 billion in exports in 2010, a 41% increase from exports of $896 million in 2009. In 2010, Japanese construction manufacturing companies exported $183 million to Ontario, with Swedish firms exporting $71 million and German companies $56 million.
Industry forecasters anticipate continued demand in the construction equipment market as construction starts are maintaining strong growth. The primary driver of growth of construction in Ontario is continued development in residential construction, primarily in the area of multi-family buildings along with commercial construction. In addition to these projects, other large construction projects in Ontario such as Waterfront Toronto, Pan Am Games Construction projects and GO Transit projects will continue to spur demand for construction equipment. Of the 10 largest Canadian construction starts in November 2011, 4 of the projects are in Ontario.