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A Hard Way to Lose a Quarter

Some mild off-peak-season improvement at the end of the year was not enough to stop 2009 from being a year that saw construction activity drop by more than 25 percent.

Although new construction starts in December improved 5 percent according to McGraw-Hill Construction, Bedford, Mass., for the full year 2009, total construction starts plunged 26 percent to $411.6 billion, marking the third straight year of diminished contracting (following a decline of 7 percent in 2007 and 13 percent in 2008).

As 2009 ended, the non-building or infrastructure sector (public works and electric utilities) strengthened in December, providing a lift to total construction that was not helped by stagnant residential and commercial levels of activity.

 “The construction industry went through a particularly tough year in 2009, as the 26 percent annual decline for construction starts was the steepest in at least the past 40 years,” says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “At the same time, the bottom for construction starts was reached in February, to be followed by an up-and-down pattern during 2009 which suggests that the transition has been made from steady decline to at least low-level stability,” he adds.

 “Single-family housing, while still remaining at a very low volume, began to show some improvement as 2009 progressed,” says Murray. “Funding from the federal stimulus bill helped to produce gains for highways and bridges, as well as a pickup for a few project types such as court houses. However, commercial building and multi-family housing registered particularly severe declines in 2009.”

Regarding what’s ahead, Murray says, “Going into 2010, more improvement is expected for housing and public works, but the commercial and institutional building sectors will continue to be adversely affected by weak employment, tight bank lending, and the eroding fiscal health of states and localities.”

In 2009, non-residential building dropped 33 percent to $162.4 billion. The retail categories were hit hard in 2009, with new store and shopping center construction starts falling 42 percent. An even larger decline was reported for hotels, down 66 percent, which included a sharply reduced amount of hotel/casino projects. The office building category in 2009 dropped 37 percent. The office decline in 2009 was cushioned to some extent by the start of several large government-related projects, such as the $922 million U.S. Army headquarters complex in Alexandria, Va., and the $747 million renovation of the United Nations Secretariat Building in New York.

Wood Chips Fueling Paper Industry

The global pulp and paper industry has substantially increased its use of woody biomass for energy during the past few years, which has consequently reduced dependence on fossil fuels, according to the Seattle-based Wood Resource Quarterly.

Since 2006, energy generated from biomass has risen more than 50 percent and in 2009 accounted for 18 percent of the energy consumed by the industry sector.

“Numerous pulp and paper plants have made the strategic decision to invest in the equipment needed to make the switch from fossil fuels to woody biomass fuels,” the Wood Resource Quarterly states in a news release.

Global consumption of biomass increased by 51 percent between 2006 and 2009, according to an analysis done using the FisherSolve platform by Fisher International, South Norwalk, Conn.

The annual consumption of biomass used for energy generation by the global pulp industry in 2009 was an estimated 75 million tons, according to the analysis. Mills in North America and Europe are the largest users of biomass material although the biggest increases in that time frame have occurred in Latin America and Asia.

As a percentage of total energy usage, the share of energy generated from biomass has, on a global basis, increased from 16 percent in 2006 to 18 percent in 2009.

Global pulpwood and biomass market reporting is included in the 50-page publication, Wood Resource Quarterly. More information on that publication is available at www.woodprices.com.