Industrial Info’s Industrial Project Spending Index registered its 10th consecutive month of increase in October. The Index is a monthly indicator, comparing current year to previous year total investment value based on actual project construction starts. Project values are tallied based on scheduled construction starts. The actual expenditure will extend for the life of the project, which in the case of larger-scale projects can extend three or four years.
The index peaked in April 2006 at 33.4% growth. Since May, project spending growth has mostly remained steady at around 26%. Each month in 2006 showed substantial growth when compared to analyzed project spending in 2005.
Industrial Info has counted 601 grassroots industrial plants currently under construction in the U.S. - almost double the total counted in 2003. Those plants represent more than $60 billion in total investment value (TIV) to engineer and construct.
Additionally, Industrial Info has tracked 1,119 projects in the U.S. originally scheduled to begin construction in 2006 that have been deferred to 2007 or beyond. These projects represent almost $115 billion in TIV. Market shifts, permitting delays, and financing issues are the main reasons for project deferrals.
What appear to be staggering numbers for project deferrals this year are actually dwarfed by current active projects. Industrial Info has counted more than 5,000 active projects with TIV of $143 billion. These include not only grassroots plants but expansions, upgrades, modernizations, additions and rebuilds.
Sixty percent of the deferred project expenditures are in the power industry, which has had 369 projects totaling almost $69 billion deferred to future years. The industrial manufacturing sector is second on the most deferrals list with 234 projects totaling $14.9 billion.
The industrial manufacturing industry has seen North American spending rise to $51.6 billion in 2006, up 37% from 2005’s final spending of $37.6 billion.
A preliminary look at the spending figures for the first quarter of 2007 indicates that the coming year could be even better than 2006. As of early November, Industrial Info Resources was tracking just over $10.2 billion in capital and maintenance projects scheduled to begin construction during the first quarter of 2007, up 27.6% over 2006.
According to Industrial Info, “The coming year will start out slowly, as with most years, as companies slow down their construction efforts during the heart of the winter. But as March approaches, the spending numbers begin taking a dramatic upwards turn as snow begins to melt in parts of North America and serious construction work can begin.”
Company analysts predict that “the industrial manufacturing industry’s spending numbers for 2007 will only continue to increase, probably topping those year-end numbers that 2006 will have posted. Despite a struggling automotive industry, which has shown some signs of modest recovery, the industry continues to devote tens of billions of dollars in capital and maintenance spending to North American operations. This should continue through the first quarter and the balance of the coming year, eventually making 2007 the best spending year in recent history.”
Here are some snapshots of various regional hot spots:
- Southwest. The Southwest market region is home to more refining, oil & gas and petrochemical industry activity than any other region in the U.S. TIV for capital and maintenance projects after three quarters of this year came to an estimated $28.2 billion, surpassing the $26 billion forecast for the region. Industrial Info is tracking over 740 capital and maintenance projects planned to kick off in the region during 2007 with a substantial increase in the TIV at over $47 billion.
- California. Industrial manufacturers and energy companies are planning almost 200 industrial construction projects worth about $15.5 billion in the state of California for 2007. Industrial project spending in California is up for 2007 after experiencing a dip in 2006.
- Harris County, TX. This industrial hot spot is on track for $1.5 billion in industrial project spending for 2006. The county has one of the largest concentrations of industrial plants in the world, with 431 major operational sites, the majority of which are located along the Houston Ship Channel.
- Iowa. With more than 110 industrial projects worth some $6.5 billion scheduled to begin construction in 2007 and beyond, Iowa is becoming an industrial powerhouse. The power industry accounts for 73% of the planned project spending from 40 projects, including merchant power plant construction, coal-fired unit additions, and several grassroots windfarms. Iowa is the leading state in the nation for the alternative fuels industry, which accounts for nine grassroots plants planned worth $931 million.
- Louisiana. Industrial Info is tracking 207 active projects totaling $4.6 billion that have either begun construction or are scheduled to begin construction by the end of 2006 in Louisiana. For 2007, there are currently 192 projects totaling $14.3 billion scheduled to begin construction.
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British Columbia. Industrial project activity, especially for projects in the early project planning stage, is on the rise for the Canadian province of British Columbia. Energy and extractive industries dominate the province’s 159 future projects totaling more than $29 billion. British Columbia is a major transportation corridor for both Alaskan oil and gas and Alberta oil sands products. The province also has a wealth of natural resources, such as minable reserves of copper, gold and coal, and the recent upswing in metals and energy prices is leading to increased exploration and development activity to extract these resources.
