OUTLOOK ’12: US construction to slightly strengthen in 2012

23 December 2011 19:00  [Source: ICIS news]

A construction workerBy Bobbie Clark

HOUSTON (ICIS)--The US construction industry should slightly strengthen in 2012, bolstered by increasing activity in multi-family and oil and gas construction, according to industry observers.

“I do think by the end of the year, the industry will strengthen a bit,” said Ken Simonson, the chief economist for the Associated General Contractors of America (AGC).

“But growth will still be uneven through the end of 2012.”

Construction has been weak for much of the year, especially in the new housing segment.

New housing is a key end-market for the chemical industry, driving demand for polyvinyl chloride (PVC); nylon for carpet fibre; flexible and rigid polyurethane (PU) foams; paints and coatings; titanium dioxide (TiO2) pigment; adhesives and sealants; and expandable polystyrene (EPS) for insulation.

The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€12,320) worth of chemicals and derivatives used in the structure or in the production of component materials.

Spending on residential construction has fallen by 2.5% to $205.8bn for January-October, compared with $211.1bn in the same period of 2010, according to the US Census Bureau.

However, Simonson said there has been an increase in the construction of apartment complexes.

Construction permits were up significantly this year, he added.

“The private sector has hired almost three million people over the last two years,” Simonson said. “A lot of them are people who have just gotten their first job and aren’t ready to buy a home or don’t have enough money for a down payment. Also, lending standards are tight, so they are renting.”

Simonson said there are also many of people who have become renters because they lost their homes during the recession.

Overall, construction spending through the first 10 months of 2011 was down by 2.9% in the US at $655.5bn.

The biggest decreases have come in the lodging sector, which fell by 26.7%, and the religious sector, which is down by 20.2%.

However, spending in the power sector, which includes oil and gas construction, was up 15.3% at $71.4bn, according to the latest statistics from the US Census Bureau.

It was the highest increase of all the sectors tracked by the Census bureau.

Simonson said that trend should continue in 2012.

The US has been going through a drilling renaissance in recent years. The combination of horizontal drilling with hydraulic fracturing has given production companies access to shale formations rich in resources, such as the Marcellus, Eagle Ford and Bakken shales.

“There’s a lot of construction that goes along with drilling those wells,” he said. “They have to build access roads, drilling pads, storage and pumping facilities as well as any hooking up of gathering lines and interstate pipelines.”

($1 = €0.77)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy


By: Bobbie Clark
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