This article continues a multi-part series about road freight volumes in New Zealand.

Aggregates – various forms of crushed rock – are used for building and road construction.

Research from the Ministry of Transport1 found that aggregates accounted for 11% of total freight volumes (tonnes) in 2012/13 and are expected to maintain this share over the next decade.

However, quarries tend to be located close to where the aggregates are used, and aggregate freight rarely travels between regions (with the biggest exception being Auckland, which receives aggregates from Northland and Waikato).  As a result, aggregates make up a much smaller share of total tonne-kilometre freight than simple tonnages.

Yet aggregates’ share of freight activity is likely to grow.  More construction and infrastructure work are expected to take place in Auckland, requiring aggregate to be brought in from outside the region, driving up freight tonne-kilometres travelled.

Aggregates largely go into making roads (66%), but are also heavily used as building materials (28%).

Graph 1

A 2013 assessment of the Brookby quarry found that roading consumes between 28,000 and 39,000 tonnes of aggregate per km for motorway, and 10,300 tonnes for local roads2 .

In contrast, building a new home requires about 400-440 tonnes of aggregate3 , while a high-rise office block consumes 13-60 tonnes per 100 square metres4 .

Data from the Ministry of Business, Employment, and Innovation (MBIE) breaks down aggregate production by different areas of use.5  Graph 2 illustrates the change in aggregate production for these usage groups over time.

Graph 2

We know that residential and non-residential building have seen strong increases over the past few years. This growth has been due to the Canterbury rebuild, but also due to strong population growth buoying demand for houses and schools, as well as office and retail space.

In contrast, infrastructure construction has experienced more moderate growth, with governments being cautious about their overall spend.

These results are shown in Graph 3. We measure all types of construction activity in terms of real work put in place (WPIP) – the value of work that has taken place, stripping out the effects of building cost changes.

Graph 3

Graph 4 shows that roading aggregate production plunged in 2008, preceding a drop in infrastructure work by a year.

Graph 4

Infrastructure work, particularly roading, is generally well signalled. In the case of 2008/09, two things happened.

1.     We had a change of government.

2.     The Global Financial Crisis (GFC).

Between 2008 and 2009, the value approved for state highway projects plunged 46% as the new National government changed tack from the Labour/Progressive coalition plans and began to shift spending to areas that would better stimulate economic growth.  With these changes occuring in 2008/09 aggregates manufacturers we able to pull back production in anticipation of the drop in roading investment.

It is possible that the 2013 slide in infrastructure work was less expected.

Buildings are the second most common use for aggregates. And, except for high-rise apartments, residential buildings use less aggregates than non-residential structures. Graph 5 and Graph 6 show the change in aggregate production compared to non-residential and residential building activity (WPIP).

Graph 5

Graph 6

The fall in non-residential construction and the slowdown in residential work put in place, along with the idea that capacity constraints are putting an upper limit on how much building can take place, have led aggregates manufacturers to reduce their production.

Moderate changes in construction activity, across both building and infrastructure, have a strong effect on the amount of aggregate produced.

We anticipate a small dip in spending on roading this year as the new government scraps some major roading plans in favour of future rail developments. There will still be a need for “catch-up” infrastructure spending throughout the forecast period, following recent strong population growth.  However, roading is expected to take up a smaller share of this growth given the government’s priorities for rail.

Graph 7

Non-residential and residential building work put in place are both expected to climb over the next few years (shown in Graph 8).

Graph 8

And in contrast to infrastructure, the building sector is expected to demand more aggregates relative to the growth in work put in place.  This increase in aggregates share is due to the growth in residential construction anticipated for Auckland – most of this growth will be in apartment and townhouse construction, which require a greater amount of aggregates.

Furthermore, Auckland’s share of New Zealand’s overall building work is expected to expand.  The increased density of construction in Auckland, which has few of its own quarries to meet the demand for aggregates, will require more aggregates to be brought in from outside the region.  As a result, we anticipate rapid growth in aggregate production and freight over the years ahead.

1 Source: Ministry of Transport (Nov 2017), Transport Outlook: Future State , Figure 39: Base Case: projected freight, p. 57

2 According to a 1996 study from British Columbia in Canada, referenced in the Brookby quarry research.

3 The Brookby research quotes 400 tonnes per house, while a 2010 report from the Ontario Stone, Sand, and Gravel Association quotes 440 tonnes per house.

4 This value depends on whether the high rise is predominantly a concrete or a steel structure.

5 Production data is based off surveys performed by New Zealand Petroleum and Minerals. The 2016 data was published in October 2017, suggesting that 2017 data will be released in a few months’ time.