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China
Chinese earthquake brings bad news to Vancouver’s building projects
By Kevin Potvin
Steel and concrete will be in even shorter supply soon, and the local lumber business will mostly miss the profits
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The earthquake that hit Sichuan province, China, ten days ago will bring aftershocks to British Columbia over the next few years. Unlike the American government following the Hurricane Katrina disaster, the Chinese government will rapidly rebuild nearly the whole province that was flattened in the quake.
The first order of business, now that the day of official mourning is behind them, will be ordering up hundreds of thousands of tonnes of steel and concrete, two commodities already in short global supply and whose prices are consequently already high. Unlike show pieces like Olympic venues and cost-analyzed and planned projects like office towers, the Chinese will be building high-rise housing that is immediately necessary with up to six hundred thousand homeless and restless citizens currently living in internal exile in tents and scrap metal lean-tos. High cost and immediate delivery will not be an issue, especially as the people in this region of China are noted for their independent streak of mind and rebellious traditions. Not for nothing did revolutionary leader Mao Zedong route the Long March through this region, host to one of the first Chinese Soviet bases. He found many willing recruits here in his rise to power and his plans to topple the government. Any delay in rebuilding will stoke the never forgotten flame of revolt in the region around Chendu.
Already high world prices for steel and concrete will go through the proverbial roof, making building material costs for Vancouver-based steel and concrete projects like the Canada Line, the Green Line train to Coquitlam, the already terribly over-budget Trade and Convention Centre, as well as smaller projects like the rebuilding of Trout Lake and Killarney ice rinks, far more expensive than planned.
Then there’s lumber. The Chinese earthquake hit just in time to pick up the slack in the locally depressed lumber market. The too-rapid harvest of BC forests, due to the ravages of the pine beetle epidemic killing trees faster than loggers can drag them off the hillsides, has left the markets glutted, and still they must cut. Chinese post-earthquake rebuilding should look after that glut lickity split, restoring the local forestry industry to profit. Chinese are well familiar with BC forestry products—the roof of the Temple of Heaven, the most famous building in China, is held up with four BC fir stumps.
But the Lord giveth and the Lord taketh away. The high cost of lumber, combined with peaking prices for steel and concrete, may finally put an end to Vancouver’s prolonged condo-building bubble. The good times looming in the forestry sector may not be enough to offset the bad times coming to the construction sector, since finished lumber, in the post-pine beetle era, is now largely manufactured in US mills. We only cut and ship raw logs, meaning most of the jobs and economic activity associated with the re-started lumber industry won’t happen here.
The housing construction boom in Vancouver has lately defied gravity. When the sub-prime mortgage financial scandal hit the US, torpedoing demand for new homes in cities coast to coast, it was widely anticipated that the same effects would hit here. After all, Canadian mortgage lending banks are just as exposed to massive losses due to rotten loans as US-based banks and are expected to retract their generous credit offerings just as deeply and rapidly.
Real estate analysts are still waiting for the other shoe to drop. Already the days of rapid escalation of home prices seem over as the buying market has finally exhausted itself of tolerance for bubbling prices. With the materials costs of new construction set for a vertical hike, the taste for buying will likely collapse all the more completely.
Nobody scrunched his newspaper tighter the morning news broke of the Chinese earthquake than local leaky condo hustler Bob “Bob” Rennie. His moment passed when those plates slipped.
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The Republic of East Vancouver masthead
The Republic of East Vancouver supports no party, advocates
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