A full year has come to a close with 2014 posting a 5 percent increase in total construction spending over the year ended 2013. Private sector spending increased 8.6 percent and public spending was up 0.4 percent. Private sector increases were led by lodging (+18.4 percent), office (+22.9 percent), power (+19 percent) and manufacturing (+11.7 percent).
Non-residential building was making a more substantial contribution to the expansion in construction. Domestic carbon steel welding fitting and forged steel flange pricing will likely remain unchanged during the first quarter of 2015. Price stability is forecasted to remain well into the second quarter of the year.
The costs and the availability of seamless pipe, plate and rough carbon steel forgings has remained stable through year-end and is anticipated to remain so during the first quarter. These are the basic raw materials that are mandatory for production that are readily available to meet the demand anticipated during the first quarter of the year. Due to the volatile state of the events in the Mideast; threats of terrorist activity both here and abroad; and the escalation of military action against ISIS/ISIL, unforeseen disruptions in the supply of raw material, instability of cost indices and energy supplies may be experienced. Therefore, it is important to continue to monitor the overall market on a regular basis.
Demand continues to remain strong for the whole range of commodity products as projects initiated in the late third quarter and fourth quarter of 2014 are driving the demand. Energy continues to be the primer for industrial projects with $590 billion in planned projects scheduled to be put in place in North America in 2015 (Industrial Info Resources). There are 8,800 planned capital and maintenance projects with approximately 3,600 maintenance projects totaling an estimated $590 billion with capital spending estimated at $579 billion.
The Midwest is set to spend $4.3 billion in food and beverage projects in 2015. There are 400 project planned ranging from $500,000 to $400 million that include milling, brewing, meat processing and dairy production. The Midwest region is comprised of Iowa, Kansas, Minnesota, Missouri, Nebraska and North and South Dakota. Illinois is set to initiate $11 billion in projects starts in 2015, with the power industry leading the pack. There are $5 billion in projects scheduled for release during the year with wind power accounting for $1.8 billion.
The chemical processing industry will have approximately $1.3 billion in new projects scheduled for construction during 2015. Mining and metals will also be a major contributor to new construction, with more than $1 billion of projects scheduled to begin construction in 2014. Despite plummeting oil prices impacting a mixed global economy, construction markets are still bullish for the oil and gas sectors, with firms preparing for growth in the U.S. and Mexico. Clients are resetting near-term budgets to reflect $70 to $80 per barrel of crude oil with current evaluations being supported by backlogs and new order flows. Lower prices of oil does not mean less oil production. Rigs will be deployed heavily in regions with the lowest production costs. Even with today's oil prices, production is increasing in the Bakken Shale, Eagles Ford, Marcellus and Permian Shale.
Midstream spending on pipeline construction is expected to continue with right-of-ways and permits having been secured to implement the need for production to be delivered to market. It is important to understand the largest amount of industrial spending in the U.S. is concentrated on natural gas. That industry sector is developing increasing amounts of fractionation capacity for natural gas liquids production, as well as massive LNG projects.
The securing of $11 billion in financing in December for the first two stages of LNG export complex near Freeport, Texas. This will keep the project on track for completion in 2018. This is just one example of the massive undertaking to expand U.S. presence in the international markets.
A looming problem confronting the industry continues to be the shortage of skilled craft labor that includes welders, pipe fitters, millwrights, crane operators and non-destructive testing technicians. This has prompted The PVF Roundtable, headquartered in Houston, to initiate scholarships funds for trade schools.
The year 2015 presents the PVF industry with optimism and opportunities in an upbeat construction market, with the first quarter being the precursor for what we can expect during the rest of the year.
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 email@example.com.