Coronavirus: the impact on the New Zealand construction industry

With shutdowns in place in China, many factories are still not operational following the standard Chinese New Year break. The landmark closures include many key manufacturers of materials relied upon by New Zealand’s construction sector, with various Chinese ports experiencing shipping congestion and delays. 

Auckland Business Chamber head Michael Barnett warned businesses to stay alert as the impacts of coronavirus spread across New Zealand, with importers (and exporters) told to keep informed and talk to their shippers, both sea and air. 

For the global construction sector, the impact is likely to be vast with a huge percentage of building materials manufactured in China and exported around the world. 

In New Zealand, the potential ramifications for the supply chain were likely to start becoming a real issue over the next few months, according to designer architectural hardware supplier Mardeco’s Marcel Eikenaar.

“Currently, we’re operating as normal as we’ve just had Chinese New Year and it’s standard to ensure large orders are placed and shipped prior to the factories closing down over this period,” Eikenaar said.

“What I expect is that we will begin to see the impact across the sector in a few months. Many of the factories we deal with have not reopened following the standard Chinese New Year shut down, which means shipments we would normally receive in May or June will be delayed. It’s those shipments that are the issue as these products would normally be in production now.

“In general, we always have products being made, products at sea and products on the ground in New Zealand, which is not the case at the moment.”

This is not an isolated issue, with many of the construction materials used in New Zealand sourced, at least in part, from Chinese manufacturers. 

For Mardeco, coronavirus has provided the impetus to consider a realignment of its supply chain. “We already work with many European suppliers including in Portugal and Spain, and it’s something we are currently considering expanding as part of a long-term realignment and as a measure to safeguard our supply chain,” Eikenaar said.

Following the Asia-Pacific Economic Cooperation (APEC) experience during the severe acute respiratory system (SARS) outbreak 18 years ago, the organisation produced a SARS action plan to deal with the outbreak.

“Lessons learnt from that experience led to the establishment of the Health Task Force to help address health-related threats to economies’ trade and security, focusing mainly on emerging infectious diseases,” the APEC Policy Support Group stated. 

“Experience has shown us that health outbreaks such as the coronavirus are economic and multilateral issues as much as they are medical concerns. We can already determine, for example, that the virus recently named COVID-19 by the World Health Organization (WHO) will weigh down economic growth, at least in the near-term. Its effects further on are yet to be determined.

“It is easy to draw parallels between SARS and this new strain. But it is still early to quantify the impact of the coronavirus’s spread on global economic growth. The world today is a different arena. China accounts for 21.4 per cent of world GDP (in PPP terms, as of end-2018) compared to around 4.5 per cent during the SARS outbreak.

“The increased interconnectedness of the global economy and the deep integration of international supply chains amplify the impact of the current health shock to an already-fragile global economic recovery.”

The disease is thought to have originated in Wuhan, the capital of China’s Hubei province, in December last year, before spreading to various other countries. As of 17 February, 2020, there were more than 70,000 reported cases globally, with 1770 deaths reported in mainland China. 

The value of non-residential construction work consented in the year to December 2019 in New Zealand was $7.5 billion, with record numbers of residential consents also issued.