Global Uncertainty & Impacts on Canada

Upon studying the changes in the prices of various construction material groups in Canada and their correlation to major global events across many nations from the onset of 2020 through 2022, some interesting trends have been observed. The events that impact price volatility have been considered for analyses and include the COVID-19 pandemic, Russia’s ongoing invasion of Ukraine and policy interest rate hikes by the Bank of Canada in efforts to wrestle the recent record-high inflation. The impacts of these events on construction material prices have been analyzed by researching the associated data related to Industrial Product Price Indices from Statistics Canada and linking them to the timeline of such events as they took place to establish the causal links and outcomes with a focus on price volatilities of specific construction material groups including energy and petroleum products. As Figure 1 depicts, there was no significant change in the prices of most of the construction material groups including primary ferrous Metals, fabricated metals, cement, glass & non-metallic minerals and machinery & equipment from January 2020 to December 2020. However, an overall increasing trend in prices was noticed starting from January 2021 until June

2022, with a drastic increment occurring in the prices of primary ferrous metals (approximately 71 per cent) and fabricated metals (approximately 45 per cent). Post-June 2022, prices of most of these construction materials were observed to have declined until the end of 2022, except for cement, glass & non-metallic minerals and machinery & equipment.

A steep price increase took place in lumber and other wood products starting from the first half of 2020 and continued until May 2021, with a total increase of approximately 131 per cent, following which the overall trend decreased to an increase of approximately 33 per cent as of December 2022, with the second major peak being noticed in April 2022 of approximately 93 per cent. All increases in prices have a close correlation to the impacts of COVID-19 – declared as a pandemic by the World Health Organization (WHO) in March 2020 –and its subsequent waves, which had devastating impacts on supply chains due to lockdowns and various restrictions imposed by different government bodies. Conversely, the decreasing trend in prices of most of these materials after June 2022 seems to have a strong connection with the policy interest rate hikes by the Bank of Canada, which was initiated in March

2022 after a considerable period of time, with a substantive increase to 4.25 per cent as of December 2022 from 0.25 per cent at the beginning of March 2022. This increase in interest rates was introduced to fight the concerning upward inflation rate in Canada, which peaked at a record high of 8.1 per cent in June 2022 before gradually decreasing.

Another interesting trend was observed in the price variation of energy and petroleum products, which decreased substantially from the onset of 2020, reaching a record-low price in April 2020 with an approximate decrease of 44 per cent over four months. Subsequently, there was a steady increase in price until the end of 2021, followed by a steep increase until June 2022. Prices reached a peak increase of 95 per cent, which seemed to have been impacted by Russia’s invasion of Ukraine beginning in February 2022 and the associated geopolitical issues that affected supply chains. Notably, beyond June 2022 the overall trend in the prices of energy and petroleum products, like the other construction materials mentioned earlier, was observed to have been decreased, which is in alignment with the gradual decrease in the inflation rate that seems to have taken place due to quantitative tightening by the Bank of Canada as one of the major contributors.

Udayan Chatterjee, B.Tech, PMP, MRICS, PMI-SP is an Associate Director - Contracts & Commercial at Lakeland Consulting Inc. He is a commercial and project management professional with expertise in quantum assessment, schedule forensics, contract and claims management. He holds a bachelor’s degree in electrical engineering and has worked on various large-scale transportation, mining and commercial construction projects across Canada and India.