US needs more trades people for construction boom
Low U.S. natural gas prices, relative stability in crude oil prices and increased consumer demand have spurred further plant construction activity, highlighting current deficits in skilled labor.
There are at least 19,800 construction projects, ranging from industrial to consumer goods, and valued at more than $1 trillion set to kick off in the U.S. from 2018 through 2020, according to consultancy Industrial Information Resources (Industrial Info).
More than 170 of these projects have total investment values of $1 billion or more, representing significant draws on area labor pools where these projects converge.
Craft manhours needed in the U.S. Gulf for industrial plant capital projects and maintenance are at the highest historical demand yet, according to Industrial Info.
Data source: Industrial Info
Industrial Info is forecasting $160.4 billion in construction spending for the South, which includes the U.S. Gulf and the Mid-Atlantic region.
Current demand for journeymen in the South is 216,876 while supply is 252,772; which equates to a utilization rate of about 86%.
A journeyman is a skilled worker who has successfully completed an official apprenticeship qualification in a building trade or craft. They are considered competent and authorized to work in that field as a fully qualified employee.
“Once the journeymen utilization rate hits 75% and higher, you start having productivity and recruitment issues,” Tony Salemme, Industrial Info Vice President of Craft Labor, said during a webinar on April 4.
Trades in the shortest supply in the South include: boilermakers, instrumentation techs, insulators, iron workers, millwrights, operators, plumbers and pipefitters. The welding trade is at 75% full employment, so could be in shortage as more projects begin, Salemme said.
Multiple projects are driving construction spending in the South including ethylene crackers and ethylene derivative plants, pipelines for natural gas and crude, power and natural gas liquids (NGL) projects and more.
Even as several new ethylene and polyolefin units begin commercial operations in 2018, construction of more than another dozen unit projects are planned to begin this year.
Additional projects are on the horizon for 2019 and 2020, with a majority of this new capacity expected to come online between 2022 and 2023.
Image: Industrial Info
The hot zones for labor demand from 2017 to 2021 in the U.S. Gulf will be Brownsville, Corpus Christi, Houston, Beaumont, Lake Charles, and Pascagoula.
Lake Charles and Houston will require the most man hours over the next few years. Lake Charles has the highest wages and per diems of any other region in the South.
The risk of a labor shortage is also the highest in Corpus Christi. Industrial Info is predicting Corpus Christi will need 10,000 travelers in the years between 2016 to 2021. The region has more than half a billion dollars in projects forecasted and currently in the pre-FID stages.
“Lake Charles is already needing to bring in travelers. We have and continue to see the effects of a shortage of labor there with escalating project costs and delays of current projects,” Salemme said during the webinar.
Industrial Info is forecasting $79.7 billion in construction spending in the Midwest region, up 12.8% from one year ago.
Craft trades in the shortest supply in the Midwest are boilermakers, instrumentation techs, insulators, ironworkers, operators and millwrights.
Economic drivers in the Midwest are refining, which is expected to see $2.5 billion in construction spending, up 3% from one year ago, according to Industrial Info.
Most of the refinery spending is refiners working on Tier 3 compliance. Tier 3 standards require most refiners to produce gasoline with an average sulfur level of 10 parts per million (ppm), down from the current standard of 30 ppm. While some refiners rushed to meet these requirements by 2017, others are using credits to meet these requirements later.
Electric power construction spending is also up in the Midwest, with $4.7 billion expected in wind power construction, $3.9 billion in natural gas power construction, $3.8 billion in coal power construction, and $1.0 billion in nuclear power construction, according to IIR.
Consumer goods construction spending is also up, with automotive manufacturing seeing the highest at $8.69 billion in construction spending.
Industrial Info is forecasting $52 billion in construction spending in the Western region of the U.S, a 12% increase over last year.
The biggest market drivers for construction spending in the West are consumer goods, with pharmaceuticals manufacturing at $5.1 billion, distribution at $4.7 billion, durable and non-durable goods manufacturing at $4.1 billion, and food and beverage at $3.6 billion.
Power spending is also up in the West, with $2.9 billion in construction spending expected for solar power, $3.9 billion for natural gas power, and $2.8 billion for wind power.
Construction spending is also up for the manufacturing of electric vehicles by companies such as Tesla and rising competitors.
Industrial Info is forecasting $35.6 billion in construction spending in the Northeast, a 2.1% increase over last year.
Demand for journeymen is 45,817, and supply is 75,239. While the balance is 29,422 or a 61% utilization rate, there are some shortages for specific trades.
Trades in short supply in the Northeast include boilermakers, instrumentation techs, insulators, iron workers, millwrights, and operators.
Projects in the Northeast that will drive demand for craft labor include power generation, natural gas pipelines, chemical processing, metals and mining, pulp and paper projects.
Power generation is an important driver in the Northeast as natural gas plants are being built to replace coal and nuclear plants. In addition, pipeline capacity is being built up as quick as permits are approved to get gas from the shale plays to users. There will be several projects to prepare and support the Shell ethylene cracker and petrochemcial complex in Beaver County, Pennsylvania.
“We anticipate further growth of the chemical industry in the northeast because it is so central to natural gas,” Salemme said.
Northeast cracker construction plans
Nearly half of construction spending in the northeast is on consumer goods construction spending. This is largely tied to packaging.
Packaging demand is largely driven by consumer spending, which is on the rise.
As online shopping increases, so does the demand for the packaging materials to ship the products in.
U.S. quarterly spending in the U.S. hit an all-time high of $12,035.23 billion in the fourth quarter of 2017, up 99% from the third quarter of 2017, according to Trading Economics.
By Heather Doyle