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Released May 09, 2017 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Pittsburgh is known as the "Steel City," a recognition of the historic impact steel mills played in the city's economic, corporate and recreational life. Pittsburgh named its professional football team the Steelers. The U.S. Steel Tower is still one of downtown Pittsburgh's most recognizable landmarks. For more than a century, Iron City Beer was brewed in Pittsburgh.
But with the decline of Pittsburgh's steel mills and the rise of Pennsylvania's hydrocarbon economy, Pittsburgh may want to consider rebranding itself as "Hydrocarbon Heaven." Over the last decade, hydraulic fracturing and horizontal drilling have made huge deposits of Oil & Gas, once thought to be uneconomic, a staple of Pennsylvania's economy. And nowhere is that more evident than in Pittsburgh.
This is the fourth in a series of articles on the demand for and the supply of skilled craft labor in various markets around the U.S. Our first article in this series, Expected Shortfall of Some Skilled Craft Labor Hangs Over Planned Industrial Projects in Los Angeles, ran March 22, 2017. Our second article, Labor Demand: Going to San Francisco? Better Bring Some Boilermakers and Millwrights! , was posted April 10, 2017. Our third article, posted April 25, 2017, was Westinghouse Chapter 11 Filing Roils Labor Markets in Georgia and Beyond.
Industrial Info will address project-spending issues at the upcoming 2017 Industrial Market Outlook, which will be held May 11 in Valley Forge, Pennsylvania. The event, which will be held at the Radisson Valley Forge hotel, will run from 4 p.m. to 8 p.m. Industrial Info's experts in the Power, Chemical Processing, Oil & Gas, Food & Beverage and Pharmaceutical & Biotech industries will discuss strategic trends and project spending in their industries. Registration to the event is complimentary, but advance registration is required. Register here!
The Marcellus Shale, which lies underneath parts of western Pennsylvania, supplies about 40% of all the natural gas extracted from unconventional formations in the U.S., according to the latest drilling productivity report from the U.S. Energy Information Administration. And industry observers say that figure is poised to reach 45% or more in the next few years.
Click on the image at right to see a pie chart of the major unconventional gas-producing formations of the U.S.
The surge in natural gas production from the Marcellus Shale has triggered a sharp rise in industrial project activity in and around the greater Pittsburgh area. Sharply rising natural gas Production from the Marcellus has triggered a dramatic increase in Metals & Minerals project activity, notably at mills that make steel pipe for use in Pipelines. More than 30 Power projects are being developed or constructed in southwestern Pennsylvania.
But the single largest project being developed in the greater Pittsburgh area is the $6 billion petrochemical complex that Shell Chemical Company, a unit of Royal Dutch Shell (NYSE:RDSA) (The Hague, Netherlands), plans to build in Monaca. That project is expected to use low-cost gas from the Marcellus Shales as a feedstock to manufacture ethylene and other petrochemical products. The multi-stage project is expected to begin construction later this year. A unit of Bechtel Corporation (San Francisco, California) is providing engineering, procurement and construction (EPC) services for that project, while a subsidiary of Jacobs Engineering Group Incorporated (NYSE:JEC) (Dallas, Texas) is serving as its general contractor.
"In a lot of ways, the Marcellus Shale has been the gift that keeps on giving," commented Tony Salemme, vice president of Industrial Info's Craft Labor Group. "Natural gas extracted there is used locally and put into pipelines to heat homes and power industrial processes in far-off states. But like demand for anything, a sharp uptick in demand or skilled crafts can overwhelm local supply, necessitating the use of traveling laborers, which can drive up project costs. This applies to some crafts."
Salemme will be a featured speaker at the upcoming Northeast U.S. Petrochemical Construction conference, to be held June 19-20 at the Sheraton Pittsburgh Hotel at Station Square, Pittsburgh. Industrial Info is a sponsor of that event, and we will exhibit at the conference. FC Business Intelligence Limited (London, United Kingdom), is producing the conference.
Industrial Info's proprietary Labor Forecast Analyzer details how the numerous industries in the metropolitan Pittsburgh area have been transformed by hydraulic fracturing and horizontal drilling.
The greater Pittsburgh area needed about 5.7 million hours of skilled craft labor per year, on average, for 2013 through 2016. But this year, Industrial Info projects local labor demand will soar to about 9.25 million hours, a 73% jump over 2016 demand. Next year, demand is expected to shoot up an additional 54%, to 14.26 million hours, before tapering off in 2019 and falling sharply in 2020-2022, as major industrial projects are completed.
Click on the image at right to see a graphic of aggregate demand for skilled craft labor in the greater Pittsburgh area from 2008 to 2021.
Here's how demand for skilled craft labor is rising in the Pittsburgh-area industries, according to Industrial Info's Labor Forecast Analyzer:
A shortfall of local labor could force developers and asset owners to turn to traveling laborers from outside the greater Pittsburgh area, which could result in higher construction costs and potential construction delays.
Over the years, the construction unions had complete local market share and provided a well-trained workforce. However, with the recession of 2001 and the housing collapse of 2008, many laborers could not find work through the union halls and left the craft, or even left the union to work as "merit" (i.e., non-union) journeymen. This is a challenge confronting leaders of organized labor: "How do we retain existing members and bring back those journeymen who have left?" In the Pittsburgh area, there is more "merit" supply of labor than is commonly believed.
Industrial Info's North American Project Platform shows the Pittsburgh metropolitan region is home to 427 operating industrial plants. Of those plants, 58% operate in a non-union environment, while 25.7% of the plants use unionized labor. The remaining 16.3% of plants, which number 46, are a mix of both union and non-union or unmanned operations.
Industrial Info's North American Industrial Project Platform shows companies in the Power, Chemical Processing, Oil & Gas Production, Metals & Minerals and Oil & Gas Pipelines industries are scheduled to begin construction on 89 projects in southwestern Pennsylvania, valued at $15.65 billion, between 2016 and 2020.
Measured by projects, the Power industry is the leader in the greater Pittsburgh area, with 32 projects valued at about $6.5 billion scheduled to kick off construction between 2016 and 2020. The Chemical Processing industry, with seven projects in the region totaling about $5.3 billion in total investment value (TIV), comes in second.
Click on the image at right to see a chart of the industries in southwest Pennsylvania with the greatest dollar-value of projects scheduled to kick off construction between 2016 and 2020.
Industrial Info doesn't expect all of those projects to begin turning dirt according to their current schedules. If history is any guide, some will be delayed, some will be cancelled and new projects will be proposed. Still, the projected shortfall of some types of labor in and around Pittsburgh is an early warning sign that supply-chain managers and cost estimators at labor organizations, asset owners and project developers may need to sharpen their pencils and double-check their calculations about the availability, and the cost, of the labor necessary to construct those facilities.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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.
But with the decline of Pittsburgh's steel mills and the rise of Pennsylvania's hydrocarbon economy, Pittsburgh may want to consider rebranding itself as "Hydrocarbon Heaven." Over the last decade, hydraulic fracturing and horizontal drilling have made huge deposits of Oil & Gas, once thought to be uneconomic, a staple of Pennsylvania's economy. And nowhere is that more evident than in Pittsburgh.
This is the fourth in a series of articles on the demand for and the supply of skilled craft labor in various markets around the U.S. Our first article in this series, Expected Shortfall of Some Skilled Craft Labor Hangs Over Planned Industrial Projects in Los Angeles, ran March 22, 2017. Our second article, Labor Demand: Going to San Francisco? Better Bring Some Boilermakers and Millwrights! , was posted April 10, 2017. Our third article, posted April 25, 2017, was Westinghouse Chapter 11 Filing Roils Labor Markets in Georgia and Beyond.
Industrial Info will address project-spending issues at the upcoming 2017 Industrial Market Outlook, which will be held May 11 in Valley Forge, Pennsylvania. The event, which will be held at the Radisson Valley Forge hotel, will run from 4 p.m. to 8 p.m. Industrial Info's experts in the Power, Chemical Processing, Oil & Gas, Food & Beverage and Pharmaceutical & Biotech industries will discuss strategic trends and project spending in their industries. Registration to the event is complimentary, but advance registration is required. Register here!
The Marcellus Shale, which lies underneath parts of western Pennsylvania, supplies about 40% of all the natural gas extracted from unconventional formations in the U.S., according to the latest drilling productivity report from the U.S. Energy Information Administration. And industry observers say that figure is poised to reach 45% or more in the next few years.
Click on the image at right to see a pie chart of the major unconventional gas-producing formations of the U.S.The surge in natural gas production from the Marcellus Shale has triggered a sharp rise in industrial project activity in and around the greater Pittsburgh area. Sharply rising natural gas Production from the Marcellus has triggered a dramatic increase in Metals & Minerals project activity, notably at mills that make steel pipe for use in Pipelines. More than 30 Power projects are being developed or constructed in southwestern Pennsylvania.
But the single largest project being developed in the greater Pittsburgh area is the $6 billion petrochemical complex that Shell Chemical Company, a unit of Royal Dutch Shell (NYSE:RDSA) (The Hague, Netherlands), plans to build in Monaca. That project is expected to use low-cost gas from the Marcellus Shales as a feedstock to manufacture ethylene and other petrochemical products. The multi-stage project is expected to begin construction later this year. A unit of Bechtel Corporation (San Francisco, California) is providing engineering, procurement and construction (EPC) services for that project, while a subsidiary of Jacobs Engineering Group Incorporated (NYSE:JEC) (Dallas, Texas) is serving as its general contractor.
"In a lot of ways, the Marcellus Shale has been the gift that keeps on giving," commented Tony Salemme, vice president of Industrial Info's Craft Labor Group. "Natural gas extracted there is used locally and put into pipelines to heat homes and power industrial processes in far-off states. But like demand for anything, a sharp uptick in demand or skilled crafts can overwhelm local supply, necessitating the use of traveling laborers, which can drive up project costs. This applies to some crafts."
Salemme will be a featured speaker at the upcoming Northeast U.S. Petrochemical Construction conference, to be held June 19-20 at the Sheraton Pittsburgh Hotel at Station Square, Pittsburgh. Industrial Info is a sponsor of that event, and we will exhibit at the conference. FC Business Intelligence Limited (London, United Kingdom), is producing the conference.
Industrial Info's proprietary Labor Forecast Analyzer details how the numerous industries in the metropolitan Pittsburgh area have been transformed by hydraulic fracturing and horizontal drilling.
The greater Pittsburgh area needed about 5.7 million hours of skilled craft labor per year, on average, for 2013 through 2016. But this year, Industrial Info projects local labor demand will soar to about 9.25 million hours, a 73% jump over 2016 demand. Next year, demand is expected to shoot up an additional 54%, to 14.26 million hours, before tapering off in 2019 and falling sharply in 2020-2022, as major industrial projects are completed.
Click on the image at right to see a graphic of aggregate demand for skilled craft labor in the greater Pittsburgh area from 2008 to 2021.Here's how demand for skilled craft labor is rising in the Pittsburgh-area industries, according to Industrial Info's Labor Forecast Analyzer:
- The Petrochemical industry is expected to see the largest percentage change in demand for skilled craft labor, rising about 528% this year over its recent historical average. For 2018, an additional 190% surge in demand is expected, followed by a further 11% gain in 2019.
- The Power Industry also expects a surge in construction labor demand in 2017-2019 compared to its recent historical average. Power is, by far, the largest single industry demanding skilled craft labor, accounting for nearly 50% of the greater Pittsburgh area's overall demand. As the region's demand for labor grows, the Power industry's demand is expected to grow.
- On a percentage basis, the Oil & Gas Production Industry is, by far, the most volatile industry in terms of labor demand. From a low of about 7,300 hours in 2008, demand shot up to 158,000 hours the next year, 205,700 hours in 2011, 542,400 hours in 2015 and 1 million hours this year. Between 2018 and 2021, demand is expected to drop significantly, to 443,000 hours next year, 202,000 hours in 2019 and 76,500 hours in 2021.
- Demand for construction labor in the Metals & Minerals industry is expected to grow by about 65% this year compared to 2016, then rise another third next year before ramping down in 2019-2021.
- Oil & Gas Pipelines are expected to see a doubling of demand for skilled craft labor this year compared to 2016, and demand is expected to remain well above that industry's recent historical average for 2018-2021.
- Although the supply of local welders is expected to equal demand this year, that will change in 2018: local demand is expected to exceed supply by 396 workers. That imbalance declines to an estimated 329 positions in 2019 and 53 positions in 2020. If all projects in the area kick off construction as planned, these imbalances will have to be remedied with traveling workers.
- Demand for boilermakers is expected to outstrip supply by 305 workers this year, 472 workers next year and 386 workers in 2019. Demand still outstrips local supply in 2020-2022, but by a smaller number each year. Again, assuming all scheduled projects in the area move forward according to their schedules, traveling labor will be needed to bring supply up to demand.
- Demand for ironworkers is expected to exceed local supply by about 202 workers this year. The deficit is projected to widen further to 410 workers in 2018, before dropping in 2019-2022.
- There is a projected deficit of local operators for the next five years, rising from 276 this year to 458 in 2018. Between 2019 and 2022, demand will still exceed local supply for this type of skilled craft labor, but by less than in 2017 and 2018.
- The demand for millwrights is projected to exceed local supply for the next five years. This year's deficit of about 203 positions rises to 308 next year before falling to 284 workers in 2019, 219 workers in 2020, 159 in 2021 and 134 in 2022.
A shortfall of local labor could force developers and asset owners to turn to traveling laborers from outside the greater Pittsburgh area, which could result in higher construction costs and potential construction delays.
Over the years, the construction unions had complete local market share and provided a well-trained workforce. However, with the recession of 2001 and the housing collapse of 2008, many laborers could not find work through the union halls and left the craft, or even left the union to work as "merit" (i.e., non-union) journeymen. This is a challenge confronting leaders of organized labor: "How do we retain existing members and bring back those journeymen who have left?" In the Pittsburgh area, there is more "merit" supply of labor than is commonly believed.
Industrial Info's North American Project Platform shows the Pittsburgh metropolitan region is home to 427 operating industrial plants. Of those plants, 58% operate in a non-union environment, while 25.7% of the plants use unionized labor. The remaining 16.3% of plants, which number 46, are a mix of both union and non-union or unmanned operations.
Industrial Info's North American Industrial Project Platform shows companies in the Power, Chemical Processing, Oil & Gas Production, Metals & Minerals and Oil & Gas Pipelines industries are scheduled to begin construction on 89 projects in southwestern Pennsylvania, valued at $15.65 billion, between 2016 and 2020.
Measured by projects, the Power industry is the leader in the greater Pittsburgh area, with 32 projects valued at about $6.5 billion scheduled to kick off construction between 2016 and 2020. The Chemical Processing industry, with seven projects in the region totaling about $5.3 billion in total investment value (TIV), comes in second.
Click on the image at right to see a chart of the industries in southwest Pennsylvania with the greatest dollar-value of projects scheduled to kick off construction between 2016 and 2020.Industrial Info doesn't expect all of those projects to begin turning dirt according to their current schedules. If history is any guide, some will be delayed, some will be cancelled and new projects will be proposed. Still, the projected shortfall of some types of labor in and around Pittsburgh is an early warning sign that supply-chain managers and cost estimators at labor organizations, asset owners and project developers may need to sharpen their pencils and double-check their calculations about the availability, and the cost, of the labor necessary to construct those facilities.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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.
