North American Industrial Project Spending Index Rises 12.31% for September – Industrial Info Resources

A construction boom in North America has driven demand for services from engineers, energy, procurement and construction (EPC) firms, equipment suppliers, technology providers, thought leaders, labor and even land.

Industrial Info Resources’ North American Industrial Project Spending Index, which measures the value of active projects in the pipeline for the year, was up more than 12% in September compared with the measurement reported a year earlier, with eight of the 12 tracked industries showing increases.

The index provides spending details by industry and market region, including monthly updates that measure the rate of activity from this year to last year during the same month.

The Index for September totaled $334.12 billion, up by $36.63 billion from September 2017.

Industrial Manufacturing registered the largest gain in September, with an increase of $26.14 billion, or 36.4%, over the value of project activity in September 2017. Total manufacturing index activity amounted to $97.97 billion in September this year.

Petroleum Refining, Metals and Minerals, Pulp, Paper and Wood, also grew significantly.


Image: Industrial Info Resources

Chemical Processing registered a drop of 8.9% from September 2017. In fact, Chemical Processing has registered a drop-in year-over-year spending for the past four months.

The Chemical Processing spending index for September amounted to $19.11 billion, compared with $20.98 billion in September 2017.

“The slight decline in petrochemical spending this year has really been the result of fewer mega projects beginning construction in 2018 compared to the past several years,” Trey Hamblet, Industrial Info Vice President of Chemical Processing Industry research said.

“By mega projects I'm referring to those projects with individual values of $500 million or more. If we take mega projects out of the equation entirely, there has actually been a slight increase in overall chemical industry spend this year, with another slight increase expected in 2019. There are still an impressive number of mega projects planned and proposed for 2019 and beyond, just not at the same level we have witnessed since 2014,” Hamblet added.

Globally, petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then.

Petrochemicals are also poised to consume an additional 56 billion cubic meters of natural gas by 2030, and 83 billion cubic meters by 2050, according to a new report

One of the more substantial North American chemical projects now under construction is Exxon Mobil’s 1.4 billion pound/year low density polyethylene unit addition in Beaumont, Texas.

Mitsubishi Corporation, Jacobs Engineering Group and Zachry Construction are working on the project, which is expected to reach completion in early 2019.

According to the Hydrocarbon Processing Construction Boxscore Database, more than 320 new downstream capital projects have been announced over the past year globally. This total represents a 43% increase in new project announcements year over year.

Most of these new projects are within the gas processing/LNG and petrochemical industries. A breakdown of each sector includes: 41% in the gas processing/LNG sector, 39% in petrochemicals and 20% in refining.

With more than 110 projects, the Asia-Pacific region continues to lead in new project announcements. The United States follows the Asia-Pacific region with a 26% market share in new project announcements.

The global economy began to grow in 2016 and has largely maintained that into the beginning of 2018.

The latest global manufacturing PMI (Purchasing Manager’s Index) data shows that the major global economies are still in expansion mode except for China. However, momentum has declined in recent months.

The global economic upswing is becoming less synchronized, with Europe slowing slightly and China slowing more.

Meanwhile, the U.S. economic expansion is nearing the longest in history. In fact, at 10 years old, this is the second longest expansion since 1900, according to J.P. Morgan.

Image: ICIS

The U.S. jobless rate dropped to 3.7% in September, the lowest rate since 1969. The U.S. Bureau of Labor Statistics said 134,000 jobs were added during the month. The jobless rate in August was 3.9%.

One of the brightest spots in recent employment reports has been construction hiring.

Employers added a net new 23,000 construction jobs in September, according to the U.S. Labor Department, and the number of people working in the industry was 315,000 higher compared to a year earlier.

But there are still construction jobs open – and the pay and perks remain competitive. At the end of July, there were 273,000 open construction jobs, according to the Labor Department.

U.S. Construction Employment 2008 to 2018

 Source: U.S. Bureau of Labor Statistics

Meanwhile, the North American Construction Starts Index, which measures the amount of project activity that has been funded and started construction this year, for September totaled $214.58 billion, up 13.7% from a year earlier.

Petroleum Refining construction start activity rose 62.2% to $5.02 billion from $3.1 billion a year earlier.

Meridian Energy Group begun construction on the $600 million Davis Refinery near Belfield, North Dakota, which would process 27,500 barrels per day of Bakken crude to produce gasoline, diesel and naphtha. SEH Design|Build Incorporated is contracted for the civil construction of the Davis Refinery, which is expected to reach completion in mid-2020.

Other industries that registered strong investment gains in the Construction Starts Index included Alternative Fuels ($2.07 billion, up 52.7%), Metals & Minerals ($16.04 billion, up 56.5%) and Pharmaceutical & Biotech ($12.9 billion, up 15.7%).

Developers have been on a manufacturing project binge this year, with year-over-year, double-digit increases seen in each month this year so far.

"As North America continues to move rapidly in the direction of e-commerce as the backbone of consumer spending, capital spending has followed suit as the data centers and distribution hubs necessary to support this shift in commerce are proposed and constructed across the landscape,” David Pickering, Industrial Info's vice president of Industrial Manufacturing Industry research said.

In regions such as the Great Lakes and the Southeast that already are home to the bulk of North America's automotive manufacturing, the additional high spending associated with data centers and distribution hubs has bolstered the previously planned investments of more traditional industries, Pickering said.

The Midwest and the Rocky Mountain regions as well as Ontario, Canada, have seen similar results.

"As e-commerce is the trend of the present and the future, we can expect this level of spending to continue for some time to come," Pickering said. "Gradually moving the bulk of consumer spending to online stores... requires significant physical storage for goods in key locations around North America and also requires significant increases in overall capacity of the Cloud that supports the online spending.”

According to the National Association of Manufacturers' latest outlook survey, released on October 5, optimism among manufacturers remains very high at 92.5%, following enactment of federal tax and regulatory reform, and is on pace for the highest yearly reading in the survey's 20-year history.

Attracting a qualified workforce seems to be one of the biggest challenges that the industry faces these days, according to the survey.

By Heather Doyle