Worker availability for new petrochemical projects tight with some construction materials in short supply

The availability of workers to help build new petrochemical plants or participate in maintenance work is seen early in the second quarter of 2023 as tight, with some key construction materials also in short supply.

Image courtesy of Borevina, Pixabay

“Demand for projects and skilled workers remains high and may even have intensified for skills required for massive manufacturing, infrastructure, and energy projects,” Ken Simonson, chief economist of the Associated General Contractors of America (AGC), told Reuters Events in April.

While the supply chain disruptions seen during the pandemic for some materials have diminished, some key construction materials like concrete remain difficult to source.

Adding up labor and material challenges, completion times for any new planned projects are now longer than before Covid-19, Simonson said.

Post-pandemic tightness

“Construction is at a greater disadvantage than before the pandemic in attracting and retaining onsite workers in an economy where more jobs can be done remotely or on a hybrid basis, many with flexible hours or the ability to leave during the day,” Simonson said.

The AGC tracks the premium that construction jobs need to offer relative to other type of work to compensate for the lack of mobility. As of March 2023 that premium was nearly 19%, compared with a low of under 15% in April 2020 during the pandemic.

That premium rose to nearly 19% over the private sector average of $28.50 but remained considerably below the average premium in nearly two decades (2000-2019) of just under 22%, the AGC said in its data digest for the month.

Texas and Louisiana

Texas and Louisiana, bordering states in the U.S. Gulf Coast that make up one of the world’s biggest petrochemical hubs, have some differences in terms of worker availability for the petrochemical industry.

“Texas has a lot of projects of various types competing for workers but the state has also been pulling in residents from elsewhere, so its workforce is growing,” Simonson said.

On the other hand, “Louisiana is experiencing much less growth in projects overall,” he said.

Construction employment increased 5% in Texas from a year earlier while in Louisiana it only expanded 1.8%, according to data shared by the AGC in April with figures as recent as February 2023. This compared with a 3.2% national average.

“Contractors' ability to staff any given project in either state will depend on how many projects are competing for that skill set at the time, which is hard to predict,” Simonson said.

Rising costs

Data shared by the AGC corresponding to subcontractor price indexes for non-residential building work indicates prices for diverse types of contractor jobs have increased.

Roofing and electrical contractors price indexes as of February 2023 have increased 20% or more compared with a year earlier while plumbing contractors are seeing a 12% increase in the price index. Concrete contractors are seeing an 8% increase in the price index.

All roofing, plumbing, electrical and concrete contractors also saw increases in the price indexes for February 2023 compared with the previous month, between 0.2% and 0.5%, with the higher increase, that of 0.5%,  corresponding to roofing contractors, the AGC data showed.

Several factors complicate planning.  “Permitting, financing, design, and procurement” do affect timing of projects, Simonson said.

Concrete in short supply

Soon after the pandemic spread in the U.S. in March 2020 and the lockdowns to prevent the spread started, supply problems impacted production. More than three years later there is still some supply challenges.

“For the most part, supply bottlenecks have disappeared or improved greatly in the past year. Transportation is much better, as well,” Simonson said.

But delivery times for switchgear, transformers, and other specialized electrical equipment “are long and lengthening. There may also be spot shortages or allocations for cement and ready-mix concrete,” he added.

 As a result, “completion times are more uncertain and likely longer than in pre-pandemic days,” Simonson said.

Prices for both asphalt and cement as of February 2023 were as much as 15% above levels from one year earlier, according to data shared by the AGC.

Prices for materials like flat glass or gypsum were about 12% higher compared with a year ago. Flat glass saw in February 2023 a 4% increase in just in one month from January, the data showed.

The petrochemical industry has in the past made use of programs to source workers in a tight labor market.

By Renzo Pipoli