In last week’s METALCONLive! webinar, “Trends in Metal Construction & Design for Q2 and 2021,” Frank Stasiowski, Co-Founder of METALCON in partnership with the Metal Construction Association along with industry experts Tony Bouquot, General Manager, Metal Building Manufacturers Association (MBMA) and Alex Carrick, Chief Economist, ConstructConnect, discussed current market conditions in an effort to help the metal design and building community with strategic decisions for Q2 and 2021. Frank’s “half-full” glass, was often countered by Alex’s “half-empty” with Tony coming somewhere in the middle. The consensus, however, was that it is too early to truly know how the rest of the year will unfold but explained which markers to keep an eye on.
Frank kicked off the event by reiterating a phrase he shared in earlier METALCONLive! broadcasts that we are in the beginning of the “roaring 20s.” A phrase he says is based on historical research of past times when civilization was faced with other pandemics, and then followed by great economic explosions.
Important indicators such as unemployment, the infrastructure bill, the rising trade and fiscal deficit, steel pricing, consumer spending and the shifting “face of de-globalization,” will all need to be monitored to understand how the rest of this year will look.
Alex, an economist for both the United States and Canada, is “cautiously optimistic” about how the next quarter and the rest of 2021 will shape up. He said, “As confidence lifts, so will the pent up demand,” but the “huge national debt is an issue and will need to be addressed.” The debt is caused not only by the fiscal deficit, but also the trade deficit. Alex explained that over the last four years, the trade deficit has climbed up to approximately a trillion dollars so the balance is off and the money will need to be put back in somehow. He raised questions such as the priorities of the infrastructure program and how and where do you spend the money, and how long will people continue to work at home and the effect this will have on the future of office space.
The conversation turned to the price of steel and all agreed that pricing is currently at an all time high presenting some challenges. Tony shared that while some of MBMA’s member companies have seen a rebound, their concern is with extending sales out too far given the uncertainties of steel’s pricing in the coming months. Some indicators show increased supply from Brazil but everyone is waiting to see if the new administration is going to keep the import tariff in place. Other eyes are on the US steel mills and if they increase capacity and the effect this will have on future steel pricing.
On the topic of growth, Frank said, “Some are saying 4-5% growth which could potentially increase demand for steel because growth will increase projects.” While Tony and Alex like the sound of Frank’s “roaring twenties” concept, two areas of concern may dampen the economic growth – pricing and labor. Labor still remains a major concern with questions about how the industry will recruit new people into the industry.
Alex commented, “The demand on steel depends on automotive, oil and gas, and non-residential construction (residential sector does not account for a lot of the steel demand).” He said the real story is in what he referred to as “mega projects.” In 2019, it was the best year in history for projects priced at $1 billion or higher and in 2020, because of pandemic, the large energy companies did not move forward with big projects ending the year with only 12 mega projects. The decline in mega projects was -75%, but if you redefine a “mega project” to a million square feet, the number of projects in 2019 was 25, putting last year at about the same. Instead of the big energy companies for example accounting for the projects, the construction marketplace saw a shift to low rise projects with tech companies buying up real estate at a high rate. There is also a lot of change happening in the distribution system in US which is increasing demand for metal type warehouse structures. Frank chimed in agreeing with this trend and thinks it will continue for the next 18 months or so. Tony also concurred, saying his members were keeping busy repurposing existing warehouses.
On the subject of “de-globalization,” the participants answered the following question from the audience: Do we think the overseas production of steel will slow down and what will the impact be? Alex responded and explained “China is ramping up infrastructure projects but they are spending their money differently. They have decided to spend their money on high tech including 5G systems, call centers, stacked computer systems, and microbiology labs. With this shift in priorities, it will impact the commodities market and steel availability.” Alex continued, “If you have de-globalization, this starts to shift the power back to the ‘working man.’ With the current administration more focused on unions and the laborers, we could see a shift of power between management and labor.
As they wrapped up the conversation, Frank asked how would each panelist would advise construction business owners to plan for a year from now. Tony shared, “In speaking with MBMA members, they are hedging their quotes right now and being cautious about locking into projects too far into the future.” Alex suggested being cautious about the projected 5% growth, keeping in mind that half of the consumer spending is in services including travel and entertainment and that portion hasn’t returned yet.
By the time the robust conversation wrapped up, it was a tale of “cautious optimism.” One looming question left on the table was also the issue of inflation. Look for the speakers to reunite in a few months for a follow-up session to address this concern and see how the market is shaping up for the second half of the year.
If you missed last week’s session, you can view it ON DEMAND. Be sure to take the survey at the end to receive your free AIA credit and certificate.