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As the first two quarters of 2014 are coming to a close we find that total value of construction put-in-place was approximately 8% above the annual rate of 2013. Gains in the private market experienced the largest increase, up approximately 12.5%; while the public sector was down approximately 2% during the same period.
Predicated on the general consensus expressed at the March Board Of Directors meeting of the MCAA, held in Philadelphia, PA, it is anticipated that a significant increase in the private sector construction market will be experienced during the third and fourth quarters of the year.
A very hard winter and wet spring has delayed the start of many projects. These projects are beginning to break ground with construction impacting the late second quarter and third quarter of the year.
The pricing for domestic commodity carbon steel welding fitting and flanges are anticipated to remain unchanged. Pricing and the availability for both seamless pipe and raw carbon steel forgings, the basic raw materials required for production, have remained stable through the second quarter and should remain stable during the third quarter.
Demand for both commodities has significantly improved as this year progresses. Demand, while not at record levels, is healthy and the expectation for improvement during the last two quarters is bullish predicated on the anticipated release of new projects during the third and fourth quarter.
Due to the ongoing turmoil in the Mideast it is suggested that you routinely check the market for any unexpected disruption in raw material supplies, cost indices and energy supplies.
Residential building has seen an increase of 16% plus, lodging 36%, office 17%, commercial 11%, manufacturing 10%, education, however, is down -1.2%. These trends are expected to continue during the third quarter, driven by private sector investment.
Again, demand for these commodities continue to be strongly driven by the energy plays in gas and oil production, gathering and processing in the shale area, i.e. Eagle Ford, Marcellus Shale, Bakken Shale, Utica Shale and in California's early stages.
Spectra Energy is expected to invest $35 Billion in capital projects in North America with $25 billion slated for the US through 2020. About $7 billion is in the project execution phase (Industrial Info Resources) heavily weighted toward the Gulf Coast Southeast and Southwest.
In addition, the mounting challenge for oil refiners is procuring the right grade of crude. US crude output is surging with the bulk of newly tapped oil being low in sulphur content and density. Many refiners were not expecting such a surge in "light sweet" crude having invested in processing heavier sulphuric blends.
This means investment in refining capacity at existing and new facilities. New or expanded refineries coming on line in the near future and the next few years will need to handle 800,000 barrels more per day.
The Pharma-Bio industry is expected to see $2 billion in investment for capital and maintenance project starts in the third quarter. This sector continues to contribute to the construction industry with 199 projects in both MRO and new facility develop scheduled for starts during the third quarter of the year.
These projects are scheduled for the Great Lakes region $570 million, New England region $377 million and the Mid-Atlantic region at $368 million.
Finally, the Power Industry in North America continues to be a significant force for demand. Conversion from coal to gas, new combined cycle gas plants and nuclear generation will be required to meet the demands for power during the summer seasons of 2016 - 2017. Increased pressure on the coal industry and coal fired power generation by the pending EPA regulations exacerbates the need for replacement capacity during the remainder of this year and well into the next decade.
In summary, PVF sector components are due for a solid upswing in the third and fourth quarters.
Stephen Letko launched his own firm, SPL Enterprises LLC, in 2000 after a distinguished career in executive positions with companies including Dodson Steel Products, Mills Iron Works and Crane Company. His expertise includes implementation of new markets, restructuring companies to improve their financial position, and developing marketing, quality and employee incentive programs. Contact him at 770-972-8282 or firstname.lastname@example.org.
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