Estimated construction costs for James Richardson International’s planned canola crushing plant near Yorkton, Sask., have come in so high that the company is re-examining the project.
But Jean-Marc Ruest, assistant vice-president for legal and industry affairs at JRI, said the plant is only delayed, not dead.
“For people to suggest that it definitely is not going ahead or we’ve reached a determination to cancel is simply not the case.”
The company is committed to the project, originally estimated at $100 million. It bought land in the Rural Municipality of Orkney, he said, and is also committed to that location.
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When JRI announced the facility last fall, followed by a similar announcement from Louis Dreyfus Canada a few hours later, the company had hoped to start building this spring.
Ruest said the bids offered by the tender deadline are “a little steep.” He declined to say how much more expensive the plant would be if the bids were accepted.
“They’re sufficiently high that we’ve got to bring them in line,” he said.
Rising material and labour costs are affecting construction projects across Western Canada in all industries.
According to Statistics Canada, the composite price index for non-residential building construction rose two percent in the first quarter of 2007 from the previous quarter, and is 10 percent higher than the first quarter of 2006.
While the numbers reflect changes in construction costs in six census metropolitan areas, the statistical agency noted the largest increases were in Western Canada and were because of higher labour and material costs.
Ruest said JRI will make adjustments that could include using different materials or scaling back the plant’s size. The original design called for a yearly crush of 840,000 tonnes.
The company hasn’t set any time for when construction might go ahead.
Louis Dreyfus project manager Brian Conn said that company’s plant is going ahead as planned. There have been slight weather delays but the earthwork will be completed this week.
He agreed that construction costs are a concern for everyone, but wouldn’t comment on whether tenders for the Louis Dreyfus plant came in high as well.
Conn also wouldn’t say what kind of edge the company will have by getting into the market first.
“We really only control what we can control, so to speak,” he said.
Louis Dreyfus expects to be crushing by the last quarter of 2008. The plant will crush 850,000 tonnes per year and was projected to cost $90 million.
