FocusHurricane Sandy to give US construction only a brief boost

31 October 2012 22:54  [Source: ICIS news]

HOUSTON (ICIS)--Hurricane Sandy may cause a spike in the construction industry as the US northeast begins recovering from the storm, but any increase in activity would be temporary with overall short-term effects, US economists said on Wednesday.

Workers will be needed for rebuilding and repairing projects, but many will be diverted from other tasks, either with the same employer or others, said Ken Simonson, chief economist with the Association of General Contractors (AGC) of America.

“Meanwhile, whatever construction might have occurred on the high-rise with the damaged crane or elsewhere in the [New York City] subway system is likely to lose as many workers as the emergency projects add,” Simonson said.

Prices for building materials such as asphalt roofing may increase for a few weeks, but they will come down as new supplies are shipped in and production is increased if needed, said Bernard Markstein, US chief economist with Reed Construction Data (RCD).

Some contractors will increase their charges beyond their increases in labour costs and materials costs, but most will look to the long term to keep their relationships with customers and their reputations solid, Markstein added.

“The result will be a waiting period for repairs determined largely by the severity of the damage,” Markstein said. “Those who are willing to pay more can always move to the front of the line.”

The time it would take to rebuild will depend on the extent of damages, individual or company resources, the speed of insurance assessments and payments, as well as availability of labour and equipment, Markstein said.

So far, there are no reports of critical production facilities damaged by the storm, unlike larger effects from bigger storms that have hit the Gulf coast, the American Chemistry Council (ACC) said.

“What we’re finding is for the most part, our chemical sector weathered the storm quite well, thanks to the preparation plans put in place such as shutdowns,” said Scott Jensen, an ACC spokesman. “Facilities are coming back on line, and the impact was fairly minimal.”

The challenge currently facing the chemical industry is restoring transportation to ship and delivery products, Jensen said.

Hurricane Sandy was a Category 1 storm that became the largest tropical system recorded in the Atlantic, measuring more than 900 miles (1,448 km), the National Hurricane Center (NHC) said.

Early estimates of potential infrastructure damages were about $20bn (€15bn), according to an assessment released by IHS Global Insight, an information company that analyses energy economics and geopolitical risks.

“In addition to infrastructure damage, Sandy has forced the idling of about 70% of the east coast’s oil refineries,” IHS said. “This does not bode well for the supply of refined oil products as capacity was already quite tight prior to the shutdowns. We are likely to see an accumulation of crude supply and a shortage of refined products in the coming days, which will inevitably put upward pressure on gasoline prices.”

Also factoring in disruption of business activity, IHS estimated total economic losses could be $30bn-50bn.

($1 = €0.77)

By: Tracy Dang
+1 713 525 2653

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