August 1, 2015 / best practices, industry news, LIT, material costs, predictive management, productivity, strategic planning
As we reported in our Metal Service Center Outlook for 2015, non-residential construction—one of the steel industry’s biggest markets—was expected to finally register some growth this year. While this market has been slow to respond to the improving economy, the American Institute of Architects (AIA) predicted an 8.1% increase in non-residential construction in 2015, driven by double-digit increases in commercial construction. Healthy gains were also expected in institutional projects such as schools and health care facilities.
So far, predictions are lining up with current data. Although poor weather curtailed construction activity in the first quarter of the year, the “overall construction market has performed extremely well to date,” according to a late-July report from AIA. “The greatest amount of activity was seen in the building of commercial properties – most notably offices and hotels – with an unusually high spike in manufacturing construction spending triggered by the surge in domestic oil and natural gas production,” AIA said.
According to the most recent data released by the U.S. Census Bureau non-residential construction spending was up a staggering 11.5 percent in June on a year-over-year basis—the largest year-over-year growth during a calendar year’s first six months since the Census Bureau began tracking construction spending in 2002. Anirban Basu, Associated Builders and Contractors Chief Economist, says the data “serves as further proof of the recovery for non-residential construction.” In addition, exactly half of the 16 non-residential construction sectors experienced growth in June, and on a yearly basis, 15 of those 16 sectors have expanded.
“However, the one sector that failed to grow during the past year, power, happens to be the largest,” Basu adds. “Had power simply remained unchanged during that time period — it’s down 16.5 percent largely because of the fall in oil prices — non-residential construction spending would currently stand at its highest level ever.”
Of course, all of this good news should mean good business for steel service centers and other industrial metal-cutting companies. However, orders for steel beams and other structural steel products have not been following the demand trend. Citing data from Metal Strategies, Inc., Metal Center News recently reported that shipments of structural steel are forecast to dip by 3.3 percent this year, despite increased construction activity. Service center executives also told the industry publication that steel beam sales in the first half of the year did not meet expectations.
Why aren’t steel orders following the upward curve of construction? According to the Metal Center News report, there are three likely reasons: uncertainty about the economy, high import levels, and excessive inventories. While all three factors will have caused some unexpected speed bumps, experts believe that metals companies can still benefit. “As long as imports don’t surge further and both service centers and mills remain disciplined, there is money to be made from the coming growth in construction,” Metal Center News concludes.
As service centers and other industrial metal-cutting companies wait for orders to catch up, there are a few other industry developments happening within in the non-residential construction segment. From new applications to new materials, the following are some cutting-edge trends worth noting:
- New applications for tube and pipe. According to a recent article from MetalForming magazine, a growing number of architects are designing elaborate structures that are using structural-steel tube and pipe in new ways. The famous Millennium Wheel (or London Eye), for example, was built using structural tube fabrication. HGG, a European supplier of tube-processing machinery quoted in the MetalForming article, anticipates this trend to continue and forecasts demand for round pipe to grow by 15 percent from the North American sector alone.
- Modular building systems continue to gain popularity. In an article from the American Society of Mechanical Engineers (ASME), Jim Snyder, director of operations for construction company Warrior Group, states that permanent modular construction will be a huge trend in the coming years. Snyder says modular construction—the process in which a building is constructed off-site and then shipped to its end destination — is reliable, faster, and helps buildings earn LEED certification (the green building certification that recognizes best-in-class building strategies and practices). “It also allows you to have an easier time doing the building as you go,” Snyder says. “Instead of building 100,000 square feet, you can do 25,000 and then later, add on.” Snyder expects the trend to affect every construction segment, from commercial fast-food establishments to high-rise buildings.
- Possible “super steel” of the future? A new alloy discovered by Korean researchers is said to make steel as strong as aluminum at almost the exact same cost, reports Fast Company. According to the article, a team of material scientists at Pohang University of Science and Technology has discovered a new type of “flexible, ultra-strong steel that has the same strength-to-weight ratio as titanium alloys, but at just a tenth the cost.” While the breakthrough has the potential to be used in buildings of the future, the new material still has a few kinks to work out before it can be mass produced. You can read a complete copy of the study here in the February 5 issue of Nature.
Making the Cut
While only time will tell whether or not metal-cutting companies will benefit from the expected growth of non-residential construction, industry leaders know that staying competitive starts with staying informed. Whether following economic data to prepare for increased demand or simply gaining insight into future material trends, success requires industrial metal-cutting companies to both know and adjust to the needs of the customers and industries they serve.