Metal-Cutting Industry Report on Non-Residential Construction

August 1, 2015 / , , , , , ,

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.”

Demand Disconnect
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.

Cutting-Edge Developments
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:



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.