Hot Topics

Construction Fatalities on the Rise: According to a recent report from the Center for Construction Research and Training, caught-in or caught-between incidents resulted in 275 construction worker deaths from 2011 to 2015 – the most of any major industry. About 69% of the deaths were attributed to “being caught or crushed in collapsing materials,” a 50% increase over the five-year period. The report also cited a number of other findings:

• In 2015, 68 construction workers died from caught-in or between incidents. That is a 33% increase from 2011, when 51 workers were killed.
• Ironworkers experienced the highest rate of caught-in or between fatalities.
• Older construction workers experienced an elevated fatality risk.
• Among other major industries, manufacturing (244 deaths) and agriculture (197) experienced the next highest totals of caught-in or between fatalities from 2011 to 2015.

The report goes on to say that caught-in or between injuries and deaths are preventable and points to training, engineering controls, safety protocols, and personal protective equipment as possible solutions. Caught-in or between incidents are among OSHA’s “Construction Focus Four” hazards, which also include electrocution, falls and struck-by incidents.

Trump Tariffs to Make Construction, Infrastructure Projects Costlier: With tariffs of 25% on foreign steel imports and 10% on aluminum signed by President Donald Trump on March 8, U.S. construction estimators and buyers have a bit more clarity as to what to expect when buying materials for future projects. While these tariffs will make domestic steel and aluminum mills very happy, the potential shift in metal prices has many industries, including construction, expecting higher costs and may also impact infrastructure spending across the nation. In a study released in early March, the D.C.-based Trade Partnership, an economic consulting group, projected that 28,000 jobs would be lost in the construction industry alone based on the original, across-the-board tariffs. However, since his original proposal, President Trump has updated his stance by exempting NAFTA members Canada and Mexico from the steel tariff and by stating that exemptions may be made based on future negotiations.

The tariffs, and expected increase in the price of raw materials, come at a time when the country faces an acute affordable housing shortage and political leaders are debating a national infrastructure plan. The cost of any action on both fronts may be increased due to rising aluminum and steel prices. According to the American Iron and Steel Institute, construction accounted for 43% of all steel shipments in the U.S. “This announcement by the president could not have come at a worse time,” said Randy Noel, chairman of the National Association of Home Builders. “Tariffs hurt consumers and harm housing affordability.” The American Institute of Architects also opposes the tariffs, saying in a statement that, “any move that increases building costs will jeopardize domestic design and the construction industry, which is responsible for billions in U.S. Gross Domestic Product, economic growth, and job creation.” It seems almost certain that the tariffs will have a negative impact on the construction industry by introducing price uncertainty. Until the market stabilizes, introducing the proposed tariffs will lead to price volatility. Additionally, the tariffs will make it that much harder to pass an effective infrastructure bill because of resulting price increases and uncertainty.

Construction Industry Can’t Find Enough Skilled Workers: Although the country’s construction industry may be swamped with work, with spending on new projects peaking at $1 trillion last November, all the demand and dollars in the world can’t seem to fix the industry’s persistent labor shortages. According to builders, the lack of skilled workers and a narrow talent pipeline has added extra hurdles, time, and costs to current projects, thereby hindering the current boom in the industry. The issue is a nationwide one. Contractors in areas such as Houston, which were battered by Hurricane Harvey last year, have struggled to staff up, and the National Association of Home Builders recently found that 82% of its members believe the cost and availability of labor are their biggest issues. By comparison, in 2011 only 13% named labor costs as their biggest worry. Even with tax reform and regulatory rollback increasing optimism for more business in 2018, builders and developers are wondering where they’ll find more skilled labor. With the U.S. adding roughly 210,000 new construction jobs in 2017 and currently experiencing low unemployment, the industry’s growth keeps it from getting ahead of the rising demand for workers. “It’s like Groundhog Day,” says John Courson, President and CEO of the Home Builders Institute (HBI). “Nothing has changed since last year.” Homebuyers are more optimistic and looking to buy new homes, but labor continues to be a big issue. As a result, builders are struggling to deliver homes on time. Frank Shaw, an economist with Fannie Mae, says the data shows hiring and wages are up for construction workers, but building is still slow overall, based on pre-recession numbers. “Homebuilders are experiencing such high demand,” he says. “Perhaps they’re just feeling really tight, labor-wise, because they simply can’t build them fast enough.” Ever since the recession, more than 1.5 million residential construction workers have left the industry. Fewer than half of those jobs have come back, making it difficult and more expensive for homebuilders to staff up, leading to a much older workforce. Those in the building trades today have an average age of around 50. Storms last fall, such as Irma and Harvey, and the sudden demand for new construction just exacerbated the existing skills shortage. Organizations such as the HBI are trying to get more students and young workers to enter the industry, but it’s been an uphill battle. In addition, many local programs have sought to create apprenticeships, recruit former military to transition into construction, and add more workers to the talent pipeline, but it takes time to change larger labor force trends. Until additional younger students begin entering the building trades, the industry may continue to suffer from these shortfalls.

Caterpillar to Close Additional Facilities: On March 16, Reuters reported that Caterpillar will close its Work Tools complex in Waco, Texas by the end of the year. Those operations will be transferred to a facility in Wamego, Kansas. As a result, approximately 200 jobs will be cut. It is also closing a demonstration center in Panama and considering shifting engine manufacturing at its Progress Rail Services unit in La Grange, Ill., to Winston-Salem, N.C. If that decision is made, more than 600 jobs will be lost. The Illinois-based heavy equipment maker continues to undergo a reorganization stemming from a worldwide slowdown in the demand for construction and mining equipment. In September 2015, the Company outlined its plan to cut capacity by reducing its workforce by 10,000 positions and closing or consolidating 20 facilities through 2018.

Broad Trends Expected to Affect Construction Industry in 2018: The increasing interest in shared living and working environments is one development that is impacting the construction industry. These flexible living and working spaces are becoming popular in major cities across the U.S., causing developers to adjust their focus in response to the heightened demand for the construction of spaces that fit these criteria. Longer-term trends that are beginning to take root include the construction of micro-housing and hotels. These living spaces or hotel rooms are far smaller in size than the industry standard. Micro-housing units might average about 300 square feet and are likely to catch on with the millennial lifestyle. Similarly, modular construction is not prevalent in the U.S., especially in major cities, but companies are trying to figure out how to do modular construction on a large scale. If they do, it will be a gamechanger for the construction industry, which will have to shift gears to adapt.

Additionally, contractors are becoming more and more tech savvy. This new breed of digital contractors thrives on data analytics and business intelligence to better understand their projects and how to deliver them smarter and faster than before. They seek out new, innovative ideas and how they can best be applied to construction.  They deploy intuitive software to power their operations and drive fast and efficient collaboration across the entire project team. While construction has historically been considered a slow adopter of technology, this new wave of digital contractors is on the leading edge of the innovations that are transforming their companies, driving more productivity and faster projects, with less risk and stronger profit margins.

Trends in Used Equipment Values

Three to four years ago, heavy equipment manufacturers such as Caterpillar, Deere and Komatsu decided they were going to retain their assets from cradle to grave. Their decision was based in part on their expectations for growth in the equipment rental market. They recognized that coming off the heels of the financial meltdown and in an uncertain economy, contractors had become more reluctant to make large capital expenditures for new equipment designed to meet updated emissions regulations. The expectations of these manufacturers have since been confirmed. Just one year ago, it was estimated that the rental market in the U.S. represented 50% of the total construction equipment market and would continue to grow. At that time, the American Rental Association expected rental revenues to reach $55.5 billion by 2020.

Also contributing to the shortage of assets coming to auction is the growth of the equipment rental market which has become popular among contractors who do not want to make large capital outlays for new equipment or to lock into 2 to 3-year leases. Just one year ago, it was estimated that the rental market in the U.S. represented approximately 50% of the total construction equipment market and would continue to grow.  At that time, the American Rental Association expected rental revenues to reach $55.5 billion by 2020.

Results from February sales at auction were mixed. Sales suggest that all terrain and rough terrain crane values have recovered, while crawlers remain soft as supply continues to outpace demand. At the same time, the demand for larger dirt equipment remains soft, while smaller to mid-size equipment has recovered.

It is Irontrax opinion that the market for sales of used heavy equipment remains stable. While the optimism experienced in early 2017 has weened a bit, it is not completely gone. Many still feel the best days are ahead for the construction industry, based in part on the additional spending anticipated in connection with President Trump’s Infrastructure Plan and the number of energy projects coming back on line.