Quarry Supply Crisis Casts Shadow Over Olympics Pipeline

Enough aggregate to make the concrete for about a dozen Burj Khalifas, the 828m pinnacle of the Dubai skyline and world’s tallest skyscraper. That’s the staggering estimate of the quarry supply shortfall facing Queensland’s construction industry in the lead-up to the 2032 Brisbane Olympics. Under intense pressure from the state’s record $116.8 billion infrastructure pipeline, its race-against-time Olympics build program and rapid population growth, it is literally between a rock and a hard place. More broadly, according to industry leaders, the supply crunch is sounding the alarm bells for one of the biggest unseen risks to the national construction pipeline. And, in the meantime, the unfolding scenario is being further compounded by a surge in fuel and haulage costs due to shipping disruptions from the war in Iran. Crunch point is right now “We’ve been warning for quite some time we’ve got this pretty critical situation developing,” Michael Kilgariff, chief executive of peak body Cement Concrete and Aggregates Australia, says. “And I don’t want to sound alarmist but that crunch point that we’ve been talking about coming is actually right now. “The demand is ramping up around South-East Queensland, the constraints on the industry are already being felt… and we haven’t even started yet on the Olympics infrastructure. This is just sort of the first act.” But the looming supply gap is not just about demand growth, he says, it is also the product of regulation, planning delays and urban sprawl. Kilgariff says under the current annual extraction caps and limits on truck movements of the region’s existing quarries “it’s going to be very difficult to supply that infrastructure pipeline”. ▲ The looming supply gap is not just about demand growth but also the product of regulation, planning delays and urban sprawl. “We estimate there’ll be a shortfall of 2 to 3 million cubic metres of aggregate.” Doing the maths—with aggregate typically making up 60 to 80 per cent of the total volume of concrete—that’s equivalent to the amount needed to build about 12 supertowers the size of Dubai’s 163-floor Burj Khalifa, which consists of 330,000 cubic metres of high performance concrete. Even looking at it from a more down-to-earth development perspective, the immensity of the shortfall is clear, with the sum of the looming supply gap equating to enough quarried material to construct a 100km-plus stretch of a four-lane highway, or an entire international airport with multiple runways. “Well, yeah, it is huge,” Kilgariff says, also making the point that other regions in other states also are exposed to the supply issues. “Regardless of where you are in Australia, if you have a sudden ramp up in terms of infrastructure, energy, water, data centres, housing…then that’s going to create issues, especially if the capacity of the industry to ramp up is limited by government regulation, which is the case in Queensland.” Demand outstrips quarry supply Findings from an independent economic analysis undertaken for CCAA last year confirmed South-East Queensland’s demand for heavy construction materials would outstrip its quarry supply, leading to cost escalations, project delays and delivery bottlenecks. The report indicated that while it has an existing approved hard rock quarry capacity of about 23.8 million tonnes per annum, demand is projected to increase to about 26 million tonnes per annum by 2032, leading to a structural supply gap. And, significantly, the CCAA has subsequently noted that the report’s estimated supply gap “is likely to be highly conservative”. “Each quarry has a cap on it in terms of how much that company is allowed to take out each year,” Kilgariff says. “Once they reach that cap…they basically just have to stop work until the beginning of the year clicks in.” In practice, he says, some quarries can’t even reach their allocated caps because of additional constraints on truck movements. ▲ The CCAA has subsequently says that the report’s estimated supply gap “is likely to be highly conservative”. Another factor exacerbating the supply issues is that bringing new quarries online — or expanding existing ones — is a slow and contentious process. “It’s not uncommon for a quarry in Australia to take 10 years to get approved,” he said. “You’ve got to be predicting where the infrastructure demand might be in a decade’s time…that’s an incredible timeframe.” Kilgariff points out that the Queensland Government is aware of the emerging supply crunch and its potential economic impact. “We’re working carefully with the government as to how we address it, how we deal with it,” he says. “There’s a number of ways we can resolve this. One is to actually approve new quarries. The second thing is that you can increase the annual caps. Third thing is that you can allow greater flexibility of truck management… [and] allow a higher mass vehicle that can basically carry a little bit more.” Answer may be outside Queensland In theory, if all else fails, he concedes some of the aggregate shortfall also could also be brought in by road or rail from other regions or states. “But the cost will be astronomical and also will put all of the regional roads that will need to be utilised to supply it completely at risk,” he says. By the CCAA’s estimates, increasing aggregate haul distances by just 45–75km can lift aggregate costs by 29 to 48 per cent, translating into a 13 to 22 per cent increase in concrete prices. “When we talk about major infrastructure projects, these heavy construction materials can be like 30 per cent of the overall cost,” Kilgariff says. “And let’s say you’ve got a billion-dollar project…it’s not hard to start adding a few more tens of millions to that project. “So without actually blowing the budget of these infrastructure and Olympics projects, the only way is South-East Queensland quarries are going to have to be the ones that supply the market.” ▲ CCAA chief executive Michael Kilgariff and builder-developer McNab chief executive Kunjan Ganatra. His warning comes on top of the backdrop of fuel shortages and sharp diesel price increases, which are already flowing through the supply chain, due to the conflict in the Middle East. “We are seeing quite considerable price rises coming through, all of which are either absorbed by the company or have to be passed on to clients,” Kilgariff says. Ahead of any potential fuel rationing if the situation deteriorates, the CCAA has called for the heavy construction materials industry to be recognised as a critical sector under the National Fuel Security Plan “It’s a just-in-time industry,” Kigariff says. “You can’t store concrete…you batch it, you have to pour it within an hour. “So given that, if this industry is placed on some sort of a ration or restrictions, then the flow through effect will be immediate… you will see construction and infrastructure come to a halt, or at least a massive slowdown. “It is fairly unprecedented, especially in terms of how quickly it has developed. And, of course, we all know that even if this is resolved tomorrow, the tail of this is going to roll out for months.” McNab: Alert, not alarmed Chief executive of leading Queensland-based builder-developer McNab Kunjan Ganatra agrees. He says the company, which manages a rolling portfolio of 35 to 40 projects, is yet to feel any major pain on the ground but is keeping a close eye on suppliers and already scenario planning and the running the numbers if there is any escalation. “I don’t think we’re at panic stations yet but we’re absolutely alert that it’s got a few Covid vibes to it in terms of what’s happening with supply chains, what’s going on with labor certainty and all that. “There are pockets that have felt the pinch already…certain supplies have literally gone up week by week such as PVC supplies. “But a lot of the companies right now are still trying to work out what the state of play is. So the movement right now is not material enough to go ‘Hey, look, it’s blowing up margins and the cost of a job’. “It’s not enough to sink a job—not yet. But I think you’ve got to be prepared for the worst.”

Quarry Supply Crisis Casts Shadow Over Olympics Pipeline

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Quarry Supply Crisis Casts Shadow Over Olympics Pipeline

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