Reports related to this article:
Project(s): View 3 related projects in PECWeb
Plant(s): View 3 related plants in PECWeb
Released June 23, 2020 | SUGAR LAND
en
Written by Tony Salemme, Industrial Info Vice President - Craft Labor Group (Sugar Land, Texas)--Industrial Info has an annual subscription called the Labor Forecast Solution that analyzes local Supply/Demand, Wages and Per Diems for the U.S., Canada and the United Kingdom.
Industrial Info initially released the First-Quarter 2020 Gulf Coast Labor Forecast on March 31, based on surveys on wages, supply and demand that had been conducted from January 15 to March 15, which in essence were pre-COVID-19.
Since then, a revision was released May 1, 2020, reflecting a post-COVID update to its labor demand forecast showing a reduction of 22% in man-hours across the Gulf Coast region in 2020.
Prior to COVID-19, Industrial Info expected an aggregate supply deficit of 23% in 2020 among the 12 crafts tracked across the Gulf Coast region. The pandemic has now caused the deficit in supply to shrink to 12%. The upward revision came from a reduction in man-hours required due to project delays and cancelations.
The industry most negatively impacted by COVID-19 is the Oil & Gas industry. In IIR's forecast, midstream and downstream processing sectors are counted. This part of the industry had already been forecasted to see a reduction in spending due to a lower volume of growth from the upstream production sector. Then a huge hit on demand caused producers to shut in almost 500 rigs, causing production to fall from a high of 13 million barrels per day (BBL/day) to 9 million BBL/day. This level of reduction is now impacting midstream pipeline construction, gas processing, natural gas liquids (NGL) recovery and liquefied natural gas (LNG) sectors, which are reducing capital investments until demand is restored. In the Petroleum Refining industry, most companies are preserving cash and delaying capital investments until fuel demand improves and stabilizes.
Those industries that are less impacted by COVID-19 are the Pharmaceutical & Biotech and Food & Beverage industries. The petrochemical sector's long-term outlook is strong. After the buildout of several mega-complexes, the industry was slower to grow this year while demand catches up with supply. COVID-19 has put another element of delay in the next phases of development, but these are expected to return in the next 18 to 24 months.
One area for growth in the U.S. Gulf Coast region is the Beaumont/Port Arthur, Texas, area. Several projects will increase labor demand by three times the amount from normal conditions.
In the Beaumont and Corpus Christi, Texas, regions, IIR is forecasting higher demand for man-hours in 2020 and 2021. Mega and medium-sized projects will move forward, but with extended schedules, less productivity and harder efforts to recruit and retain travelers. COVID-19 health and safety measures and concerns are making it harder to recruit senior A pool craftsmen. Less people are willing to travel during an active pandemic without a vaccine. In addition, much like 2014 and 2015, many travelers will retire, file for disability, change to local jobs or remain unemployed during this time.
Click on the image below for a graph showing Industrial Info's Post-COVID-19 Top-Line Spending and Labor Assessment for the Greater Beaumont Area.
Some of the mega-projects under construction in the Beaumont area include:
In the field, furloughs and layoffs were evident early in the shutdown, but now, most projects under construction are beginning to staff up again while navigating the challenges of bring people back to work.
In the Permian Basin (West Texas and New Mexico border), mass layoffs are occurring due to the shut-in of many wells in response to lower crude prices and the surplus of supply. There's an assumption that field labor could transition into industrial plant construction and maintenance and fill the void. However, that's not truly the case. The population of labor supply in the Permian Basin is only a fraction of what's needed in the Gulf Coast region. Most of the skill sets or trades do not match those needed for industrial plant applications.
The crossover crafts in the upstream market that could meet the requirement for industrial plant work are few, and depending on their location, most would have to travel or relocate to the coastal region in order to be part of the labor pool.
In IIR's first- and second-quarter wage surveys, only one contractor reported reducing wages, while others considered it but had not lowered them yet. What's likely to happen is a reduction in per diem costs first before wages are taken down. Owners and engineering, procurement and construction (EPC) firms may look to take advantage of lower wages because they believe there's a surplus of workers. However, they may find that's not the case. There will continue to be the need to pay A and B pool craftsmen (more experienced workers) wages in the 75 to 90 percentile range to secure them.
This year holds a higher degree of uncertainty both economically and socially. Construction labor, being a target for stringent social distancing measures, could have an impact on capital projects moving forward. How owners, contractors and workers deal with the new norm will unfold over time. As we move forward during the next two quarters, a better understanding of the new labor supply chain will be revealed.
Based on IIR's surveys, a greater number of projects scheduled this year have been pushed out into the future, most into 2021 time period, as opposed to simply canceling. We do expect smaller projects focused on efficiency gains, compliance measures, automation, upgrades and capacity creeps to be more popular over the next 18 months.
Industrial Info Resources provides a nationwide outlook for labor supply, demand and wages by metropolitan region. Our forecast now extends to Canada and the United Kingdom. The next quarterly update and companion reports are due for publication in July.
Reach out to Tony Salemme at tsalemme@industrialinfo.com
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Industrial Info initially released the First-Quarter 2020 Gulf Coast Labor Forecast on March 31, based on surveys on wages, supply and demand that had been conducted from January 15 to March 15, which in essence were pre-COVID-19.
Since then, a revision was released May 1, 2020, reflecting a post-COVID update to its labor demand forecast showing a reduction of 22% in man-hours across the Gulf Coast region in 2020.
Prior to COVID-19, Industrial Info expected an aggregate supply deficit of 23% in 2020 among the 12 crafts tracked across the Gulf Coast region. The pandemic has now caused the deficit in supply to shrink to 12%. The upward revision came from a reduction in man-hours required due to project delays and cancelations.
The industry most negatively impacted by COVID-19 is the Oil & Gas industry. In IIR's forecast, midstream and downstream processing sectors are counted. This part of the industry had already been forecasted to see a reduction in spending due to a lower volume of growth from the upstream production sector. Then a huge hit on demand caused producers to shut in almost 500 rigs, causing production to fall from a high of 13 million barrels per day (BBL/day) to 9 million BBL/day. This level of reduction is now impacting midstream pipeline construction, gas processing, natural gas liquids (NGL) recovery and liquefied natural gas (LNG) sectors, which are reducing capital investments until demand is restored. In the Petroleum Refining industry, most companies are preserving cash and delaying capital investments until fuel demand improves and stabilizes.
Those industries that are less impacted by COVID-19 are the Pharmaceutical & Biotech and Food & Beverage industries. The petrochemical sector's long-term outlook is strong. After the buildout of several mega-complexes, the industry was slower to grow this year while demand catches up with supply. COVID-19 has put another element of delay in the next phases of development, but these are expected to return in the next 18 to 24 months.
One area for growth in the U.S. Gulf Coast region is the Beaumont/Port Arthur, Texas, area. Several projects will increase labor demand by three times the amount from normal conditions.
In the Beaumont and Corpus Christi, Texas, regions, IIR is forecasting higher demand for man-hours in 2020 and 2021. Mega and medium-sized projects will move forward, but with extended schedules, less productivity and harder efforts to recruit and retain travelers. COVID-19 health and safety measures and concerns are making it harder to recruit senior A pool craftsmen. Less people are willing to travel during an active pandemic without a vaccine. In addition, much like 2014 and 2015, many travelers will retire, file for disability, change to local jobs or remain unemployed during this time.
Click on the image below for a graph showing Industrial Info's Post-COVID-19 Top-Line Spending and Labor Assessment for the Greater Beaumont Area.
Some of the mega-projects under construction in the Beaumont area include:
- Qatar Petroleum's (Doha, Qatar) and Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) $3.3 billion Golden Pass LNG Terminal in Sabine Pass; see project report
- Total SA's (NYSE:TOT) (Paris, France) $1.8 billion Port Arthur Ethane Cracker; see project report
- Valero Energy Corporation's (NYSE:VLO) (San Antonio, Texas) $700 million Port Arthur Refinery Delayed Coker Expansion; see project report
In the field, furloughs and layoffs were evident early in the shutdown, but now, most projects under construction are beginning to staff up again while navigating the challenges of bring people back to work.
In the Permian Basin (West Texas and New Mexico border), mass layoffs are occurring due to the shut-in of many wells in response to lower crude prices and the surplus of supply. There's an assumption that field labor could transition into industrial plant construction and maintenance and fill the void. However, that's not truly the case. The population of labor supply in the Permian Basin is only a fraction of what's needed in the Gulf Coast region. Most of the skill sets or trades do not match those needed for industrial plant applications.
The crossover crafts in the upstream market that could meet the requirement for industrial plant work are few, and depending on their location, most would have to travel or relocate to the coastal region in order to be part of the labor pool.
In IIR's first- and second-quarter wage surveys, only one contractor reported reducing wages, while others considered it but had not lowered them yet. What's likely to happen is a reduction in per diem costs first before wages are taken down. Owners and engineering, procurement and construction (EPC) firms may look to take advantage of lower wages because they believe there's a surplus of workers. However, they may find that's not the case. There will continue to be the need to pay A and B pool craftsmen (more experienced workers) wages in the 75 to 90 percentile range to secure them.
This year holds a higher degree of uncertainty both economically and socially. Construction labor, being a target for stringent social distancing measures, could have an impact on capital projects moving forward. How owners, contractors and workers deal with the new norm will unfold over time. As we move forward during the next two quarters, a better understanding of the new labor supply chain will be revealed.
Based on IIR's surveys, a greater number of projects scheduled this year have been pushed out into the future, most into 2021 time period, as opposed to simply canceling. We do expect smaller projects focused on efficiency gains, compliance measures, automation, upgrades and capacity creeps to be more popular over the next 18 months.
Industrial Info Resources provides a nationwide outlook for labor supply, demand and wages by metropolitan region. Our forecast now extends to Canada and the United Kingdom. The next quarterly update and companion reports are due for publication in July.
Reach out to Tony Salemme at tsalemme@industrialinfo.com
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
