Jim Thompson

Email Jim at jim.thompson@ipulpmedia.com

I am speaking about the capital projects sector for 2024 and going forward a bit.

Construction labor shortages are likely to get worse before they get better. Why? The battery plants being constructed around the United States. These seem to be ringing in at around $5 billion per copy. If half of that is labor and labor is averaging $80 per hour, each plant will need approximately 31,250,000 hours to complete. That's a lot of paper machines or converting plants.

On top of this, these facilities will consume concrete and structural steel at rates concomitant to their TIC (Total Installed Cost). As a reference, a project I worked on for the last year and a half experienced ready mixed concrete allocation limitations at certain times, and it wasn't even near a battery plant.

No wonder Nippon Steel wants to buy US Steel. At $15 billion, it seems to be a bargain when one looks at the potential construction work out ahead of us for the next few years.

A mitigating factor may be a reduction in construction of large office towers in big cities. However, such developers seem to be modifying their product to more of a mixed-use offering, which may be a move able to maintain a large portion of their backlog for them.

Other items one can expect to be consumed in prodigious quantities by these new facilities will be cabling, fiber optics, motor starters, and so forth. The buildings may look different, but the basics are the same whether it is a battery plant or a paper machine.

And to carry this further, engineering services may also be pinched by this construction phenomenon outside our industry.

Finally, in the past year, PaperMoney (www.globalpapermoney.com) reported 181 expansion stories through November of 2023 in the "Capital Projects of Note" department. So, there is plenty of internal to the industry competition for 2024.

When I consider the overall situation for 2024, my take is this: the primary capital equipment suppliers (paper machine builders and so forth) may think the markets will be tight for them (read: good for you if you are building a project), but for the rest of the supply for a construction project, things will be tight for you.

For the project manager, once again, there are no generalizations--you'll need to not only know your project but know all the conditions that might affect your project, both visible and hidden.

Be safe and we will talk next week.

#pulpandpaper

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