US petchems hires to peak in April 2016 on Southern growth

The demand for skilled labor in the growing US chemicals industry is expected to peak in April 2016, at around 155,787 workers, according to Daniel Groves, workforce director at the Construction Users Roundtable (CURT) and chief executive of data provider Construction Industry Resources.

The highest recruitment levels are expected in the Southeast of the US, where the number of chemical sector workers is set to rise to 131,922.

The demand for labor across the Southeast’s manufacturing, process and refinery industries is projected to reach its highest levels between January and July this year, according to Groves.

In parallel, employment in the power and natural gas sectors is likely to hit a peak between July 2017 and October 2018, based on committed projects and subsequent payroll projections.

Speaking at the Petrochemical Update Workforce Development conference in Houston, Texas on April 29, Groves said that the US’ industrial construction sector will see a peak of about 1.25 million workers over the next five years.

Groves cited the latest forecasts by the Construction Labor Market Analyzer (CLMA), an analytics tool that produces real-time labor market intelligence based on payroll data from more than 4 million projects across the US, valued at around $4.2 trillion.

“When we just look at the Southeast alone and we compare that to what’s happening in the rest of the marketplace, roughly 50% of the non-residential construction activities are happening in the Southeast and East,” Groves said.

According to a recent survey by CLMA, 77% of industrial construction firms are currently having problems finding qualified skilled labor.

Some 56% of owners and contractors across the US Gulf Coast are seeing productivity losses due to the tight labor market, according to a study conducted by CLMA and CURT in February 2015.

More than half of them are reporting productivity decreases of more than 10%, with the Southeast seeing the largest impact, followed by the Atlantic Midwest, particularly among pipefitters/combo welders, speciality welders, electricians, boilermakers and ironworkers.

Some 72% of the survey respondents also said that they are experiencing higher weld failure rates due to persistent shortages of qualified skilled workers. Around 33% of them said their weld failure rate was less than 5%, while 17-20% reported double-digit weld failure rates in their projects.

Heading South
The five States with the highest labor-drawing project spending are in the Southeast, according to outlooks for 2015-2019. 

In terms of put-down spending on industrial construction, Texas comes out on top with $208 billion, followed by Louisiana ($192 billion), Mississippi ($41 billion), South Carolina ($41 billion) and Georgia ($34 billion).

Much of the investment in the region is going into downstream energy projects on the back of rising US shale gas production. In the petrochemical industry alone, there are six new ethylene crackers currently under construction in North America, most of which in the US Gulf Coast, according to research by Petrochemical Update.

In the meantime, at least eight companies have announced plant expansions, many of which are already underway. A number of other petrochemical projects have been announced, though not yet approved.

The current pipeline of greenfield and brownfield construction projects is valued at around $24 billion, according to Petrochemical Update estimates.

An age-old issue
The swift expansion of the US petrochemical industry in the last three years and the aging skilled craft workforce in the construction sector are prompting some petrochemical owners such as South Africa’s Sasol to ramp up their average annual recruitment from less than a dozen to thousands over the next few years.

Sasol, which is building an $8.1 billion cracker and derivatives complex near Lake Charles, Louisiana, expects to hire almost 5,000 construction workers over the next three years and some 500 full-time employees when the facility comes on stream in 2018, according to Jeffrey Gill, senior HR leader, Learning and Talent Management at Sasol.

An estimated 17% of the construction workforce in the US will retire in the next eight to 10 years, representing attrition of about 800,000 skilled workers, according to the CLMA. The percentage for supervisors is much higher, according to Groves.

The average age for skilled workers in the industrial trades, such as ironworkers, electricians, pipefitters, heavy equipment operators and millwright, is 42, with an expected employment attrition rate of 11% in the next couple of years, 17.61% in the next five years and 29.08% in the next 10 years.

The fall in oil prices since mid-2014 will not change the overall trajectory of supply and demand, at least in the short term, according to Groves.

“The impact on the oil and refining market place is significant, but when you look at what’s increasing in other areas of the construction market and what’s expected over time – the long arch of this impact – we don’t see a very significant impact on the demand for skilled labor,” he said.

In Louisiana, employment in the growing petrochemicals sector is expected to peak at lower levels than forecast before the oil price slump, but the peak is likely to last longer, Curt Eysink, executive director of the Louisiana Workforce Commission (LWC), told Petrochemical Update.

The LWC’s latest mid-term labor demand projections forecast the spike to arrive towards the end of the 2014-2016 period.

By Nadya Ivanova