413 billion of ongoing industrial megaprojects in Canada - Sharp drop in new announcements

$413 Billion of Ongoing Industrial Megaprojects in Canada – Sharp Drop in New Announcements

June 26, 2014

E&B DATA estimates that 33% of the total value of announced projects is actually fragile, i.e. delayed, reduced or even compromised. This is a significant increase from the end of 2012, when 24% of the value of all projects was deemed to be fragile.

Metal mining and processing

More than 75% of the $132 billion worth of investments announced by December 2013 in Canada’s mining and primary metals sector is concentrated in potash, iron ore, gold and aluminum. In the potash industry, the collapse of the potash cartel is finally being felt. The fall in the price of potash affects the outlook for the $43 billion worth of ongoing projects: only 58% are on schedule (compared with 82% in December 2012). While the prices of iron ore have yet to recover to 2011 levels—when prices last reached pre-financial-crisis levels—half of the total value of iron ore mining and processing projects is considered fragile. Moreover, weakness in gold prices ($1,411 US per ounce in 2013 compared to $1,670 US per ounce in 2012) [1] is causing uncertainty among investors: E&B DATA estimates that more than 40% of the total value of these projects could be compromised. Regarding aluminum, international competition for production sites dragged the completion of two-thirds of these projects in Canada down into a fragile state.

Oil & Gas

The opening up of overseas markets for Canada’s oil & gas is now, more than ever, a top priority. While transportation projects (pipelines, LNG terminals) made up 31% of the total value of oil & gas projects in December 2012, they made up 41% in December 2013. Nearly every LNG project (pipelines and terminals) progresses diligently toward construction, while oil-related projects face obstacles at every stage. Some oil-extraction projects are experiencing significant cost overruns, while new processing projects (refineries) must be justified in relation to existing capacity (especially in the southern United States). Overall, 35% of announced oil-related projects ($70 billion) can be described as fragile. Despite these obstacles, nearly two-thirds of oil-related projects (worth approximately $140 billion) are progressing smoothly towards completion.

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[1] Annual averages. Peak of $1,772 US per ounce in September 2011. World Bank.