Brisbane Roads Circling Globe Twice Needed in Flood Disaster

To build an average house, you need 6,200 bricks, 2,950 roof tiles, 785 floor tiles and 15 cans of paint -- multiply that 28,000 times and you get a picture of the task to rebuild Brisbane after Australia’s worst flood.

It gets worse: the state of Queensland will need to rebuild 90,000 kilometers (56,000 miles) of roads, enough to circle the globe twice, thousands of kilometers of rail line, almost 100 schools, an unknown number of bridges, several regional airports, power lines, sewers and water treatment -- the list goes on.

Australian companies, including its largest building- materials seller Boral Ltd., the No. 1 furniture and electrical retailer Harvey Norman Holdings Ltd., paint maker DuluxGroup Ltd. and plumbing supplier Reece Australia Ltd., will benefit from the reconstruction estimated to cost A$20 billion ($20 billion). The floods are the most expensive natural disaster in the nation’s history and have claimed at least 20 lives.

“The state’s a disaster zone,” said Greg Hoffman, general manager at the Queensland Local Government Association, which estimates up to 90,000 kilometers of road and “tens of thousands of drains” will need to be replaced or repaired across Queensland. “Roads have been torn away, airport terminals have been uprooted and you can’t believe your eyes when you see the wasteland left behind,” he said in a telephone interview.

Reinforcements Needed

The average cost of building a new home is A$300,000, meaning the bill to replace housing alone in Brisbane, Australia’s third-largest city with a population of 2 million, may be A$8 billion, Australia & New Zealand Banking Group Ltd. says. ANZ based its forecast on the state Premier Anna Bligh’s Jan. 16 comment that 28,000 dwellings need rebuilding. Bligh says 2.1 million people have been affected by Queensland’s flood.

Since Jan. 10, 20 people have died and nine are missing as a result of the floods, Queensland police said yesterday.

It will take two years and 34,000 tradesmen to rebuild homes in Brisbane, according to Graham Cuthbert, Master Builders Queensland executive director.

“Australia has never before seen a program of this scale,” Cuthbert said in a telephone interview. “We will probably need reinforcements.”

Builder John Rist, from Port Sorrell in Australia’s southernmost island state of Tasmania, is ready to pack his tools and drive 1,800 kilometers north to Queensland.

“I’ll be there in a flash, as long as there is a need,” 38-year-old Rist said in a telephone interview. “Things will probably slow down here, so it could be just what I need.”

Competition for Labor

Finding skilled labor for the reconstruction in Queensland, plus the flood-damaged eastern states of Victoria and New South Wales, may be difficult. A mining boom, to feed China’s appetite for raw materials, has caused a shortage of tradesmen at a time when the jobless rate was just 5 percent in December, the lowest level since January 2009.

Already two coal-seam gas projects, expected to cost more than A$30 billion, are proceeding near the Queensland port of Gladstone. Santos Ltd., Australia’s third-largest oil producer, and BG Group Plc, the U.K.’s third-biggest gas producer, will start hiring the first of more than 10,000 construction workers needed for the two projects later this year.

The Queensland Resources Council estimates A$2.3 billion of coal sales have been lost because of the floods and just 15 percent of Queensland coalmines have been at full production.

The extra construction work and spending to replace lost consumer goods may add as much as 1 percentage point to the nation’s economic growth rate, according to ICAP Australia Ltd. senior economist Adam Carr. The Reserve Bank of Australia forecast in November that the economy would grow 3.75 percent this year.

Curtains to Cars

“Think of the building supplies that will need to be purchased, the carpets that need to be bought, the curtains, toasters, refrigerators and the cars,” Carr said in a Jan. 19 note.

Gerry Harvey, executive chairman of Harvey Norman, said sales in Queensland would outpace the rest of the country in February and March as people replaced plasma televisions, washing machines and household goods.

“This is Queensland’s very own economic stimulus and our sales will be stronger there than anywhere else,” Harvey said in a telephone interview. “People will need to refurnish their homes, so there will be a benefit for retailers.”

Boral and James Hardie Industries NV, Australia’s largest supplier of fiber cement products, both told Bloomberg News they expect demand for their products will increase as the damage becomes clearer. The Insurance Council of Australia on Jan. 19 said companies had so far received 12,000 claims worth A$410 million.

Stocks to Watch

“It’s clear that there’s going to be a significant rebuild required in areas both involving construction materials and building products,” said Penny Berger, a spokeswoman for timber, tiles and concrete supplier Boral. Berger said customers would lodge orders after the clean-up was completed.

Since Jan. 12, after evacuations began in Brisbane, Boral shares gained 0.8 percent, Reece rose 4.3 percent, Harvey Norman gained 7.9 percent, James Hardie fell 4 percent and DuluxGroup advanced 1.1 percent.

“There are more losers than winners, but the winners are the homebuilders and some of the smaller retailers,” said Chris Stott, who helps oversee about $400 million at Wilson Asset Management in Sydney. “It’s clear they’ll benefit, but in terms of quantifying that, it’s still too early because the clean-up is still happening.”

Stocks he tips will benefit include Boral, Harvey Norman, Reece, Dulux, Fantastic Holdings Ltd., a furniture seller, Breville Group Ltd., an electrical appliances maker, CSR Ltd., which manufactures building materials, and Brickworks Ltd., which makes bricks and floor tiles.

Volunteer Army

Queensland’s initial flood clean-up is being done by about 60,000 mop-wielding volunteers.

“They’re scraping mud from walls, shifting ruined furniture, it’s dirty work,” Volunteering Australia spokesman Peter Cocks said from Brisbane. “After the clean-up, people can assess the damage and look toward replacing things and rebuilding their homes. It’s a process.”

The flooding across three states represents Australia’s biggest natural disaster in economic terms, said Prime Minister Julia Gillard, who has pledged the federal government will cover 75 percent of the reconstruction cost. ANZ Bank said the bill to rebuild just Queensland could be as much as A$20 billion, or 1.5 percent of the national economy.

The sugar- and coal-producing state accounts for about 20 percent of the A$1.3 trillion economy. The national and state governments have not yet said how much the flooding will cost.

“This effort is bigger than Cyclone Tracy in 1974, which destroyed Darwin, it’s bigger than the 1989 Newcastle earthquake, the 1999 Sydney hail storm and any other flood or bushfire we have seen,” said Professor Peter Grace, from the Queensland University of Technology. “It will take at least two years.”

source:http://www.bloomberg.com