2016—What to Expect

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By Jim Stavis

Eclipse—What to Expect 2016

It used to drive me crazy when the calendar would turn to October and we would start planning for Thanksgiving, Christmas and New Year’s. In fact, I’ve already seen movie trailers for movies coming out next summer. Remember when we used to live for today? But, like it or not, 2016 is upon us and we need to start preparing for it. What I do enjoy is contemplating what the future holds and then sticking my finger in the air like the rest of the world.

While the rest of the economy barely shuffles along these days, there are and always will be business opportunities in construction across the country. “Construction is outperforming the rest of the economy,” according to Kenneth Simonson, chief economist for the Associated General Contractors of America. “And manufacturing has been the superstar this year, with spending up 20 to 30 percent over last year.” This bodes well for the steel and metals industries.

The manufacturing hotspots are mainly in the chemical sectors with plant and component assembly, and energy-related transportation equipment orders for light and heavy trucks, railcars, barges and even airplanes have hit record highs. Spending on hotels, motels and resorts will be up a startling 42 percent this year over last and should continue into next year. Spending on health care facilities and data centers will also continue to grow across the country. We can identify three major sectors offering growth opportunities for metal suppliers and manufacturers: First is the “shale gale,” as it is called, including the infrastructure to support it, chemical plant expansions, new LNF export terminals and fueling stations. Second, the newly expanded Panama Canal has been propelling U.S. port expansions on the West Coast, East Coast and the Gulf. The new, bigger Panama Canal locks could be operational in as soon as nine months, which means significant spending on cranes, storage units, bridges and upgrading of rail yards.

The third trend, which should continue into next year, is the increase in residential construction with multifamily units up 24 percent over the last four years and single-family dwellings up 13 percent in the same period. Vacancy rates are at or near multi-year lows throughout the U.S., and the trend toward urban living seems certain to continue. Have you been to Downtown L.A. lately? It’s a total renaissance of construction down there. Even in sectors where the economy is changing the nature of construction, there are a host of new opportunities. For example, as consumers switch from mall and store shopping to online, there will be less brick and mortar places. As a result, the need for massive warehouses and distribution centers shall be required. Likewise, the nature of office construction is changing as well. Mega-office parks are being replaced with smaller, more open spaces sprinkled across the country.

The only dark cloud in all this is the state of government spending. In spite of the Obama Administration’s effort to pass a highway infrastructure bill through Congress, it is questionable whether or not it will happen. This would be a real boon for the metals and construction sectors. Also, the continued advancement and support of the solar industry remains uncertain going forward. This, too, could have far-reaching effects on the metals industry. We will see.

At the end of the day, no one really can foresee what will actually be. I was recently speaking with a friend who is one of those guys who follows solar eclipses. He told me that on September 1, 2016, a solar eclipse will be visible here in the United States. I thought to myself about what our world would look like if we could predict our business as my friend can predict an eclipse. Yes, we would be far better prepared, but then, perhaps it wouldn’t be quite as much fun. Just one man’s opinion!


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