Planned expansion of chemical plants to cause construction industry strain
In a bid to capitalize on the availability of cheap shale gas, U.S. chemical companies are prepared to invest over $90 billion in the next few years to expand their existing plants and to build new ones.
However, their plans may be at risk because such a dramatic expansion would cause a strain on the construction industry across all levels. A new analysis by research company IHS claims that plant expansion from design and engineering to welding will be slowed down by rising costs and a shortage of construction workers.
Average construction costs are on the rise and inflation is predicted to kick in as soon as large-scale investments for plant expansion get going, the research predicts. Thanks to a boom in U.S. industry as a whole, chemical companies are not the only ones planning big expansions, which might put additional pressure on the construction sector and inflate prices, the Financial Times said.
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Moreover, many of the projected new chemical plants are planned to be located in a relatively small area, in southern Texas and Louisiana, which will pose an extra challenge. The Financial Times estimated that the Shell facility that was under consideration but was eventually dropped would have required about 10,000 construction workers.
According to Hassan Ahmed, a chemicals analyst at Alembic, just four of the proposed seven large-scale developments for ethylene production are likely to start by the end of 2017 -- those planned by ExxonMobil, Dow Chemical, Chevron Phillips Chemical and Sasol.