A growing worldwide requirement for new and upgraded basic infrastructure is set to continue driving investment in major civil engineering projects. That trend is further fuelled by the fact many countries are making such projects a key element of their post-pandemic economic recovery. The project logistics and heavy lift sector is on hand to help realise these ambitions. Phil Hastings reports.
Civil engineering projects have become a cornerstone of many countries’ post-pandemic economic recovery plans. However, a drawback for the civil engineering industry and its logistics service providers is that various external developments could inhibit new investment in construction activity, at least in the short term.
Those negative factors include fears of a general global economic recession, high interest rates, volatile energy costs and the Ukraine/Russia war. A mix of positive and negative influences is also apparent in the civil engineering industry itself. On the upside, many of the supply chain problems over the last couple of years now appear to be easing. On the downside, labour and skills shortages are reportedly becoming an increasing challenge in some parts of the world.
Atradius, a Netherlands-based provider of credit insurance, debt collection and information services worldwide, published Construction Industry Trends 2023 earlier this year. It said: “The short-term outlook for the global construction industry is clouded by high levels of uncertainty. With a looming economic recession in major markets due to soaring energy prices and high interest rates, prospects for growth will be muted in 2023.
“Tighter monetary policy and lower household purchasing power will weigh on demand for new buildings. Aggressive policy tightening by central banks in 2022 has lifted borrowing rates and thereby reduced the demand for building construction work.” More positively, the report also suggests that a large backlog of work will help to “mitigate somewhat” the impact of those factors on construction work done during 2023. Additionally, it said that investment in infrastructure will drive growth in construction activity.
Boosting economies
“Governments worldwide continue to champion major infrastructure projects to boost their economy’s productive potential and drive the post-covid economic recovery. This will see civil engineering be the fastest- growing sector in the construction market,” said the report.
However, Ruedi Reisdorf, ceo of Swiss global forwarder Fracht which works on metro, railway, road, tunnel and airport projects worldwide, said the global requirement for better infrastructure is currently being overshadowed by developments relating to energy supplies. “Globally, the big volumes of present and upcoming projects are in the power and oil and gas sectors rather than infrastructure.”
Reasons for that include power shortages practically all over the world, the drive towards renewable energy and the fact that the Russia/Ukraine war means all oil and gas resources outside Russia are suddenly more valuable,” he explained.
“Infrastructure projects are last in terms of government priorities, plus in many countries it is difficult for governments to get the necessary permits to build new infrastructure, even where it very much needed. The situation is even worse when it comes to the maintenance and renewal of existing infrastructure – there is no lobby for such work so it is an easy area to target when governments are looking at ways to save costs.”
Eslam Salah, projects director forEgytrans, an Egyptian integrated transport and logistics provider whose present activities include transporting steel and concrete beams of up to 60-70 m in length for bridge construction projects in that country, also suggested the civil engineering market is generally quiet at the moment. “Due to the global economic situation, it is not so good,” he reported.
Emre Eldener, managing director of Turkish logistics service provider Kita Logistics, said the current picture in its markets is mixed. It is presently involved with major civil engineering projects including the construction of a subsea tunnel underneath the Bosporus Strait and the mobilisation of equipment for road construction schemes across a region extending from Moldova to Afghanistan
Downward trend
“We are seeing a downward trend in terms of the number of shipments and also a slowdown when it comes to the financing of major projects in our region,” he stated. However, with the Ukraine/Russia war affecting many transport corridors, Türkiye has become a major gateway for moving cargo between east and west. “For example, we have been transporting earthmoving machinery between Europe and the CIS via a bonded warehouse and Turkish port,” he commented.
Other logistics industry executives are more upbeat, however. One of those is Rafael Martinez, sales manager for Mammoet, the Netherlands-based global heavy lift services provider involved with a range of urban infrastructure projects, notably bridges and other civil engineering work worldwide.
Recent examples include executing lifts for the Merchants Bridge rehabilitation project in St Louis, Missouri, USA; the removal of the Lek Bridge near Vianen in the Netherlands; the refreshment of a terminal at Portland Airport, USA; and the construction of twin viaducts linking road tunnels on either side of the Bolintxu valley near Bilbao, Spain.
“Over the last few years, we have seen a constant stream of civil engineering projects relating to the renovation of ageing infrastructure, especially road and rail bridges,” stated Martinez. “That sector is now being further fuelled by government investment designed to stimulate economic growth after the Covid-19 pandemic.”
Additionally, he continued, many pieces of infrastructure in some developed countries are now at the end of their lifecycle – just this year, for example, the US government launched a USD27 billion project to renew around 15,000 bridges nationwide. “As populations grow and urbanise, infrastructure must keep pace to support continued economic growth. For this reason, I am optimistic and convinced that this growing trend will go on in the coming years,” concluded Martinez.
Erik Zander, chief operating officer for Omega Morgan, a North American heavy rigging and transportation provider whose current activities include hauling components for the construction of large chip-manufacturing facilities, suggested the civil engineering sector will be further boosted by a demand for new manufacturing plant. “We are continuing to see the onshoring of complex manufacturing facilities in the USA and I believe demand for supporting project logistics services in that market will stay strong,” he reported.
“Even if manufacturing activity slows,there is going to be significant investment in maintenance projects because so many factories have been running all out to catch up post the covid pandemic.”
Long term, the value of the global construction/civil engineering market is widely projected to see a compound annual growth rate (CAGR) of 4-6 percent over the next five to six years, at least, suggesting a picture of overall steady growth. Zander goes along with that view. “There is a tremendous amount of work to be done just to maintain current infrastructure. Assuming funding is in place, there are definitely going to be projects to complete,” he commented.
Upcoming projects
Kita’s Eldener is also optimistic about the longer-term picture, at least as far as the markets serviced by that company are concerned. “In addition to projects in Türkiye itself, Turkish contractors make up the second-largest number in the global civil engineering/contracting market after the Chinese, so it is a strong market for us. We see upcoming projects in the Middle East, especially in Saudi Arabia, and in Africa, for example in Tanzania and Ghana.”
Egytrans’ Salah is similarly positive about longer-term civil engineering sector project prospects in Egypt. “There are ambitious plans for future major projects relating to general construction, transportation and green energy all over the country,” he commented.
Globally, growth in heavy and civil engineering construction activity over the next few years will be driven by technological development. That, at least, is the prediction made in the Heavy And Civil Engineering Construction Global Market Report 2023 published by the Business Research Company, a multinational market research and intelligence provider.
“Areas of rapid technological change include smart highways, 3D concrete printing, drone surveying, kinetic roads, ‘tiny houses’ and solar roads. Due to the advancement in technology, the demand for better infrastructure will increase and positively impact the demand for heavy and civil engineering construction,” it states.
However, Fracht’s Reisdorf is more cautious about prospects for the next few years. He questions where the suggested overall 4-6 percent CAGR for the worldwide construction/civil engineering market will come from. “It is feasible in some countries but globally it will be very difficult to achieve,” he commented. “Governments are spending money but more on areas like defence rather than infrastructure. Meanwhile, rising interest rates will cause problems for both governments and the private sector. Global investment in infrastructure is likely to see some big ups and downs.”
Within the civil engineering industry itself, while many of the more acute issues with construction material supplies over the last couple of years now appear to be easing, some problems remain. “Due to the global economic situation, there are still some shortages of materials and resulting supply chain challenges,” confirmed Egytrans’ Salah.
The scale of such issues worldwide over the last couple of years has already prompted many civil engineering companies to re-evaluate the structure of their international supply chains. The background to that trend was outlined by Yannick Sel, group commercial director for Sarens, a global provider of heavy lift, transport and rigging services for a wide range of civil engineering projects, notably bridge construction/replacement.
“Recent worldwide issues with supply chains are leading governments and companies to look at derisking those operations and sourcing more locally. Governments are also looking for more local content in projects. Taking those aspects into account, we have also had to change our views on where we source from, although quality remains a key driver,” he stated.
Reisdorf confirmed that “everybody is checking on their supply chain and building up alternative suppliers, if possible closer to them and/or the customer, so-called near shoring”.
Specific factors driving this trend, he continued, include the need for Western countries, in particular, to find alternative sources for products previously supplied by Russia and a more general move away from seeing China as the sole manufacturing hub for the world. “Previously niche sources of construction materials and equipment supplies are getting bigger, making the market more global. Managing the logistics for such projects is therefore also becoming more global, which is where companies like Fracht that already have that experience can offer an advantage,” he explained.
Meanwhile, labour and skills shortages are reportedly becoming an increasingly serious issue for many civil engineering projects, particularly in some more developed parts of the world. One result of that trend, reported Omega Morgan’s Zander, is an increasing push towards modular construction, with resulting reduced onsite labour requirements.
However, he also said the overall labour market in North America might see a change over the next 18 months. “The technology sector seems to be slowing and I wonder if we will see a transition of some of those employees into other industries.”
As far as the specific provision of logistics for civil engineering projects is concerned, Reisdorf suggested there are ways around labour challenges for service providers with the right sort of organisational set-up. “There is still a need for ‘feet on the ground’ at the project location, but a lot of the management can now be done remotely. One of the keys to doing that is global teamwork, but you need to have the right company culture for that to work.”
Shortages challenge
Sel said his company’s response to the challenge of labour and skills shortages includes a training centre designed to develop local workforces. “That proved to be a key aspect of being able to continue executing projects during the pandemic as we had locally trained staff, minimising the need to mobilise staff from overseas,” he noted.
Mammoet’s Martinez also played down the issue of labour and skills shortages as far as his company’s operations are concerned. “We have been a global service provider for many years and these fluctuations are not new to us,” he stated. He claimed Mammoet’s international structure puts the company in a good position to tackle such challenges. However, Salah said that in Egypt, for example, labour and skills shortages are “a serious problem which needs more attention from the government and a focus on ‘technical education’, especially for drivers and technicians”.
