A Bright Future: Construction, Auto, and Energy Forecasts

Construction

Ken Simonson, chief economist for the Associated General Contractors of America, pointed out that residential construction has rebounded, while non-residential construction is still below where it was pre-pandemic. It doesn’t help that people are foregoing construction careers to work indoors.

At 3.5%, the unemployment rate among individuals with construction experience has dropped and left the construction industry searching for qualified workers. It’s worth noting that the unemployment rate varies by state, with the top five states being Utah, Idaho, Tennessee, South Dakota, and New Hampshire.

The bottom five states include New York, North Dakota, Hawaii, Kentucky, and New Jersey. Overall, 31 states gained traction with an increase in construction employment, West Virginia remained stagnant, and 18 states and DC saw a decline.

Simonson expects to see a slower recovery due to Russia’s invasion of Ukraine, with sanctions adding to costs and supply chain pressures. Those costs and obstacles may lead to project deferrals. Even with the recent Infrastructure and Inflation Reduction Acts, funds will take some time to be distributed.

All in all, Simonson anticipates the best prospects to be manufacturing, data centers, and renewable energy, with warehouses and multifamily projects seeing a slowdown.

Automotive

Another industry that is experiencing stagnation is the auto industry. We all know about the infamous semiconductor shortage and the delays it created with automotive sales. Ford Bronco anyone?

Bernard Swiecki, research director at the Center for Automotive Research gave some insight into what led to the problem and where we’re headed.

When people started working from home, consumer demand for electronics increased. Currently, there are 1.6 million fewer vehicles, and production levels remain low due to ongoing chip shortages, noted Swiecki. He added that new vehicle inventories are at their lowest levels since October 2019.

We can expect significant investments in electrification from the auto manufacturers, in fact, it has already started. “The automotive industry has invested heavily in electrified vehicle technology and capacity since 2014. In 2021 and the beginning of 2022, some of the largest investments in the US automotive industry history were announced, totaling nearly $70 billion,” said Swiecki.

As we had the privilege of seeing with GM, EVs are here to stay, and we will see North American electrified vehicle production grow rather rapidly. However, if EVs continue to sit on the expensive end of the market, high values and high prices will accompany them.

Energy

There certainly will be a substantial demand for energy with all the EVs coming online. “Nationwide, carbon emissions from electric power have decreased and are expected to continue decreasing,” said Frank Fredrickson, vice president of customer experience for Minnesota Power. “There’s been a shift from 5% renewable to 50% renewable energy over the past 15 years.”

Like many organizations, Minnesota Power has the intention to become carbon-free by 2050. However, like any goal, it does not come without obstacles. “Electric generation transition is driving the need for transmission expansion,” said Fredrickson.

Expansion requires materials, and steel is essential in every technology. More and more materials will be required to build wind and solar power to expand the energy grid. Fredrickson indicated that the typical steel used for onshore wind power is 140 tons per MW, 40 tons per MW for solar, and 50 tons of tower steel per mile for 500kV transmission.

Though some near-term hurdles remain, the future for steel is bright.

By Becca Moczygemba, Becca@SteelMarketUpdate.com