As we enter the fourth quarter of 2019, the Bureau of Labor Statistics is reporting the construction sector unemployment has declined to 3.6 percent.
Nonresidential specialty trade contractors added 5,400 jobs and the heavy and civil engineering category added 4,400 more positions. The residential specialty trade contractor sector was the only construction sector to show a loss, losing 4,700 jobs.
“Construction employment gains would likely have been higher if firms could find even more people to hire,” says Ken Simonson, chief economist for the Associated General Contractors of America. He notes that a recent AGC survey found 80 percent of the reporting contractors continue to have problems hiring enough qualified craft workers.
Anirban Basu, chief economist for the Associated Builder and Contractors, states: “And with a construction backlog of nearly nine months as of June 2019, data indicates the contractors continue to enjoy substantial demand for their services despite the nearly continuous drumbeat of dismal economic forecasts for 2020-2021.”
The industry has added more than 177,000 jobs over a 12-month period as of the beginning of the fourth quarter. The average hourly earnings rate at the end of the third quarter was $30.84, an increase of 2.79 percent for the year-earlier figure.
Oil, Gas Pricing and Production
The U.S. Energy Information Administration (EIA) lowered its 2019 Brent crude oil price to $63/bbl, lower than the $64/bbl reported here in the September PVF Market Overview. The lower price forecast for this year reflects the recent global oil price fluctuations and lower estimates for global oil demand. Global economic indicators continue to decline, contributing to oil pricing volatility and declines.
The Henry Hub natural gas spot price averaged $2.22/MMBTU as reported by the EIA in September. This was $0.15 lower than in the August report. Prices have declined amid rising gas production, despite high levels of gas exports and consumption in the power sector.
Predicated on recent pricing movement and EIA’s assessments that gas production will be sufficient to meet forecasted demand and export levels at lower pricing previously predicted, the EIA has lowered its Henry Hub spot price for 2020 to an average of $2.55/MMBTU, $0.20 lower than the EIA forecast a month ago.
Even in light of the softer pricing, U.S. gas pipelines are still racing to keep up with record production with $8 billion worth of construction set to start by the year’s end. The increase in production is driven by the growing use of domestic gas as an energy feedstock along with the increasing global demand for liquified natural gas. Pipelines are needed to take away gas from the fields to power plants and processing plants.
Venture Global LNG Inc. is just one of the many companies betting on the continued growth of the export market. The company is building its estimated $2.5 billion Calcasieu Pass export facility in Cameron, La. The complex will be comprised of five modules, each producing 1 million metric tons a year for global clients such as Royal Dutch Shell and BP plc.
A $75 million gas pipeline will supply the project, carrying up to 2 billion cubic feet a day for about 24 miles from a station in Grand Chenier, La.
Mid Coast Energy, a subsidiary of ArcLight Capital Partners, is planning to start the CJ Express Pipeline from Carthage to Hardin County, Texas. The pipeline will carry up to 700 million cubic feet a day about 150 miles to a connection with the Clarity Pipeline, which runs processing facilities along the Gulf Coast.
Chesapeake Utilities Corp. is expanding its Eastern Shore Pipeline, in the Northeast Region, into Pennsylvania with two new segments: one from Hockessin, Del., to the Pennsylvania border and one from the border to Honey Brook, Pa. They are 55 miles and 70 miles, respectively, and are expected to carry up to 100 million cubic feet a day.
Also in the Northeastern Region, American Power Ventures will start construction on a 1,000 MW natural gas-fired combined cycle power plant on a 33-acre brownfield site next to the closed Hatfield’s Ferry Power Station in Carmichaels, Pa. The project has a total investment value (TIV) of $800 million.
In the Midwest Region, Husky Energy is planning to start rebuilding its 45,000 BBL/d Superior Refinery in Wisconsin in October. TIV is $400 million and has a projected return to operations in 2021. It is the first refinery along the route of the Enbridge Mainline pipeline bringing Canadian oil. This facility is ideally located to process Canadian crude feedstocks into high-demand products such as gasoline, diesel and asphalt for the U.S. market.
The Great Lakes Region — consisting of Indiana, Kentucky, Ohio and Wisconsin — is set for $4.4 billion start during the fourth quarter in the power industry. Ohio has the lead with more than $2.7 billion in TIV value.
Ohio has two grassroots natural gas-fired projects. One is in Byesville, Ohio, approximately 80 miles east of Columbus. Apex Power Group is starting construction on the Guernsey Power Station. This project is a 1,650-MW facility and has a TIV of $1.49 billion.
The second project is a 1,050-MW natural gas-fired combined-cycle plant located near Cadiz, Ohio. EmberClear Corp. of Houston is taking advantage of the vast amounts of Utica Shale gas. TIV is $1 billion with completion scheduled for the summer of 2022.
In the Southeast Region, South Carolina and Alabama are seeing increased paper machine spending with more than $1.5 billion in combined projects scheduled for a fourth-quarter startup.
Texas is also expecting to see more than $3.4 billion in fourth-quarter industrial manufacturing project starts.
In Texas, the Dallas-Fort Worth metro area seems to be the focus for data center projects. Digital Realty Trust Inc. is planning to start construction on a grassroots data center located in Garland, approximately 15 miles northwest of Dallas. The first phase includes construction of a 280,000-square-foot data hall with 32 megawatts of power to provide regional colocation services.
Phase II is planned to start construction shortly after the Phase I start and will include doubling of the square footage and power capacity of the facility.
In the manufacturing sector, Stanley Black & Decker Inc. is starting construction on a hand-tools manufacturing facility in Fort Worth. The 425,000-square-foot building will include three production lines and auxiliary systems to produce Craftsman brand toolsets. The $90 million project is expected to take a year to complete.
In Houston, the George Bush Intercontinental Airport will begin the modernization of Terminal A in the fourth quarter. The more than $196 million project will replace the existing building management system with a modernized system to allow automated and scheduled management of energy-consuming systems.
Predicated on current market conditions, pending litigations and possible tariffs (pending negotiations), it is recommended that you keep in close contact with your suppliers regarding the pricing and the availability of carbon-steel butt welding fittings and forged-steel flanges.
Please note that this an overview of some of the many projects in the planning stages for kickoffs in the fourth quarter of the year. They should generate an uptick in PVF activity as we move forward toward the year’s end.
PVF Roundtable Networking Meeting
The next networking meeting of the PVF Roundtable is scheduled for Oct. 15, beginning at 4:15 p.m. CDT at the Houston Marriott Westchase, 2900 Briarpark Dr., 844-419-4681.
The board of directors urges you, and your associates, to attend the networking meetings. This platform provides the opportunity to keep up with current market conditions, developing opportunities and trends — and expand your network of valuable contacts.
This meeting will consist of a networking session with an open bar followed by a sit-down dinner. Our guest speaker for the evening will be Terry Bradshaw, renowned quarterback and four-time Super Bowl champion of the Pittsburgh Steelers. Bradshaw played his collegiate career at Louisiana Tech. He was inducted into the Pro Football Hall of fame in 1989, his first year of eligibility, and into the College Football Hall of Fame in 1996.
Please refer to the PVF Roundtable website (www.pvf.org) to register early for this popular event.