Infrastructure plan threatened by severe shortages in the United States | New
Perhaps the biggest threat to President Joe Biden’s vision of boosting the US economy with the biggest infrastructure program in decades isn’t his difficult path through Congress, but a severe shortage of everything, workers at cement factories.
While weeks or months of negotiations will be needed to enact legislation, Republicans and Democrats are united in their support for hundreds of billions of dollars in new infrastructure spending in the years to come. Yet the companies that will be relied on to pave the roads, build the bridges, lay the water pipes and assemble the trains are yet to plan to meet those needs, say economists and industry insiders.
And it is even then that they face immediate shortages – from steel and cement to labor supply – resulting from the unprecedented difficulties of a sudden reopening of the economy after the closures last year.
“There is already a labor shortage in construction, so you cannot drop a trillion dollar nuclear bomb into the industry,” said Bassem Hamdy, CEO of Briq, a company that performs cost estimates for construction companies. âIf you don’t have workers, how will this happen? “
Construction companies are still excited about more business, but are not taking steps to boost hiring or relocate workers in anticipation of the package’s adoption, Hamdy said. US steelmakers are not increasing supply enough to meet expected demand. And tariffs on items such as aluminum and lumber hamper affordability.
The shortages caught the attention of the White House. Biden, touting his infrastructure plan during a visit to Cleveland, Ohio, said his administration “will take action to combat these supply pressures, starting with building materials and bottlenecks in the industry. transport “, with plans to be unveiled in the coming days.
Despite all the âMade in Americaâ push from Biden and his predecessor, Donald Trump, American manufacturers face a legacy of historically poor growth over the past decade and a future colored by lackluster American demographic trends. These factors alone discourage companies from increasing their capacity, even in a context of sky-high prices.
Consider steel, the price of which climbed about 225% to $ 1,665 a tonne in the year to May 31. Biden’s legislation would increase demand for the material by 5% each year during the first five years of an infrastructure plan, or about 5 million tonnes per year, according to CRU Group, a raw materials research company.
The capacity planned for commissioning by the end of 2022 is only around 4.6 million tonnes per year, according to Andrew Cosgrove, an analyst at Bloomberg Intelligence. It would lower the prices and provide even more.
Yet US Steel Corp., the country’s oldest metal maker, is giving up investing in its factories.
CEO David Burritt told shareholders in April he would abandon a more than $ 1 billion plan to rehabilitate a Pittsburgh steel plant that dates back to Andrew Carnegie. The company has no plans to restart any blast furnaces it closed in 2020. Steel for infrastructure projects accounts for less than 1% of US Steel’s annual revenue, according to compiled data. by Bloomberg.
In Charlotte, North Carolina, Nucor Corp., rather than revealing preparations for new factories, the company authorized a $ 3 billion share buyback plan last month.
Nucor said in a statement that “we are ready and prepared to do our part to help rebuild our country’s infrastructure,” and listed $ 4.24 billion in investments over the past three years to modernize and expand the production capacity and product portfolio of the company.
Despite this, American producers are so overbooked on orders that American consumers are forced to rely on foreign steel – despite the Trump administration’s maintenance tariffs.
Tom Conway, chairman of United Steelworkers, North America’s largest industrial union, said he feared the supply crisis means the infrastructure push will have to source materials from overseas, benefiting to other countries with job gains, instead of the United States
âHere’s what I think the administration needs to be concerned about,â Conway said over the phone. âThey’re going to squeeze and squeeze and squeeze to try to get an infrastructure bill and all these manufacturers will say, ‘We’re not ready. We need more track to prepare. In the meantime, launch it abroad and realize the projects and we will start ours. ‘ “
The booming housing industry thanks to low mortgage rates is worried about competition from infrastructure projects. The National Association of Home Builders says the United States will need to lift tariffs on lumber and import more key metals to ensure there is enough aluminum for appliances, copper for wiring and cement for the foundations.
US sawmills have not kept pace with construction, and the housing industry imports about 30% of its lumber from Canada. Lumber prices have increased by around 400% since the start of the 2020 recession.
The infrastructure bill “will create a huge demand for steel and concrete that will hamper our ability to build multi-family housing and other types of housing,” said Jerry Howard, CEO of NAHB. âYou have to increase production. And where is it going to come from? Only god knows. It will be difficult to implement because of the lack of supplies, manpower, everything. “
One constant shortage cited across the country is that of people. The infrastructure bill increases the demand for skilled workers, which the United States does not necessarily have. The manufacturing industry remains down by more than 500,000 jobs compared to February 2020. Immigration could help, but it is a politically difficult goal given the Republican opposition.
“By the time the infrastructure arrives on the ground there will be a labor shortage and to some extent the government will have to compete with private companies for people,” said Aneta Markowska, chief economist of the United States at Jefferies LLC.
Delays in passing the infrastructure bill could prove beneficial, according to Michael Gapen, chief US economist at Barclays Plc. The constraints on supply chains could ease over time, he said.
âIf you get past infrastructure too early and we try to get all of these products, we’re just going to intensify the existing friction in the markets,â Gapen said. “But most people think an infrastructure bill won’t come into effect until next year.”