Brick Market in British Columbia

Brick Market in British Columbia

The demand for construction materials including concrete pipe, bricks and blocks, which together comprise NAICS 32733 industrial codes throughout British Columbia continues to experience consistent growth, year over year, beginning in 2000. There are several catalysts that are fueling the growth of demand for pipe, bricks and blocks, and the focus of this analysis will specifically be on demand for bricks in the British Columbia province. The goal of this report is to analyze the specific catalysts that are fueling the growth of construction in general and brick demand specifically, also taking into account the implications labor force growth necessary to support the projected increase in production as well.

Construction Demand Increasing in British Columbia

The first and most significant growth catalyst influencing the demand for bricks is the 45.1% growth between 2004 and 2005 alone, not taking into account significant projected demand from the construction necessary for the 2010 Olympic Games in Vancouver. Table 1 presents an analysis by Statistics Canada which shows the relative rate of historical growth of office building construction by major metro area.

Table 1: Value of investment in office building construction in Canadian Major Metro Areas: 2000-2005 (Dollars in Billions)

Source:

http://www.statcan.ca/english/research/11-621-MIE/11-621-MIE2006043.pdf

In addition to office building construction, investment is up in shopping centres, warehouses, hospitals, educational institutions and government-sponsored facilities. Table 2 illustrates total value of investment in British Columbia for the years 2000-2005 for non-residential construction.

Table 2:

Value of investment in non-residential building construction, by province and territories, 2000-2005 (Dollars in Millions)

Source:

http://dsp-psd.pwgsc.gc.ca/Collection/Statcan/11-621-M/11-621-MIE2006043.pdf

When the above data sets are analyzed using moving average analysis, the following forecast is derived, shown in Table 3. Taking into account higher spending in 2010 for the Olympics by $900M (based on estimates from BCStat) the total available market for non-residential building construction is projected to be $11B in 2010.

Table 3:

Value of investment in non-residential building construction, by province and territories, 2006-2010 (Dollars in Millions)

British Columbia

Today 12% of total Canadian construction spending is in British Columbia, as is computed from Figure 2. This is expected to increase to between 14 and 16% of total Canadian construction spending by 2010.

Forecasting Brick Demand

In forecasting demand for all products in the NAICS 32733 classification then breaking down the forecast specifically to bricks, the three steps shown in the previous section were critical as they showed the rate of historical growth by period and the significant change projected to occur in the 2007-2010 timeframe. Taking the rate of change in construction spending in British Columbia based on the forecast in Table 3, when applied to the figure of $671M of all manufacturing shipments from Strategis (see Appendix 1) the following forecast for NAICS 32733 is derived:

Table 5: Forecast of Spending for NAICS 32733 (Dollars in Millions)

British Columbia

According to Hanson (2007) and Lafarge Canada, both companies report that 30% of total demand for their products that compete in the NAICS 32733 industrial classification are brick products. Applying this figure of 30%, which has been corroborated through a review of Hanson (2007) Securities and Exchange Reports, yields the following forecast shown in Table 6, in millions of dollars, for brick sales in British Columbia during the forecast period of 2007 to 2010.

Table 6: Forecast for Brick Revenues in British Columbia (Dollars in Millions)

British Columbia Brick Sales Forecast

Millions of Dollars)

To re-cap, the research methodology to derive the brick revenue forecast for British Columbia involved the following steps. First, non-residential and apartment construction historical spending were used as a baseline for deriving relative growth of spending on products that comprised NAICS 32733, the industrial code that includes bricks. Second, a forecast was derived using moving average analysis to ascertain based on past revenue what the probable future growth rates by year would be. Third, these growth rates were applied to historical sales of NAICS 32733 products sold into British Columbia. Fifth, by uysing publicly available financial data from Hanson and Lafarge Canada that indicates 30% of total NAICS 32733 demand are bricks; this multiplier was applied to the data. Sixth, the brick forecast was derived.

British Columbia Brick Competitive Environment

The dominant competitors in British Columbia include Lafarge Canada, which has two processing plants in the southern region of the province, Hanson Canada, a multinational corporation that has operations in 24 countries including being the leading provider of bricks and building materials in the Quebec and British Columbia provinces. In addition, Boral, Acme (Berkshire/Hathaway), CRH and Wienerberger are multinational competitors with operations throughout British Columbia. In addition to these multinational companies there are 25 smaller manufacturers according to Statistics Canada. The table from the Statistics Canada website is shown below:

Number of Establishments in Canada by Type and Region

Concrete Pipe, Brick and Block Manufacturing

(NAICS 32733)

Province or Territory

Employers

Non-Employers/

Indeterminate of Canada *

Alberta

British Columbia

Manitoba

New Brunswick

Newfoundland and Labrador

Northwest Territories

Nova Scotia

Nunavut

Ontario

Prince Edward Island

Quebec

Saskatchewan

Yukon Territory

CANADA

Percent Distribution *

Source: Statistics Canada, Business Patterns Database, December 2005 http://www.strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis32733este.html

The dominant competitors in British Columbia have varying business models and marketing strategies. BC Brick Supplies is primarily in the decorative brick market, concentrating on selling bricks for ornamentation and decoration of buildings. This is also true of Coast Masonry and Tristar Brick and Block. Competitors who concentrate on commercial construction including Fabrikem, Fero, LXL, Lafarge Canada, Lehigh Northwest Cementt (which produces bricks and block in addition to wholesaling cement), Interstate Brick and Kryton International.,

Appendix

Value of Production

Principal Establishments**

Manufacturing Shipments and Manufacturing Value-Added

Concrete Pipe, Brick and Block Manufacturing Industry

(NAICS 32733)

Measure of Production

Value in $millions

CAGR*

Change

Manufacturing Shipments

Manufacturing Value-Added

Notes:

Compound annual growth rate