The biggest threat to President Joe Biden’s vision of energizing the U.S. economy with the largest infrastructure program in decades may not be its challenging path through Congress, but a dire shortage of everything from workers to cement mills.
While weeks or months of negotiations will be needed to enact legislation, Republicans and Democrats are united in their support for hundreds of billions of dollars in new spending on infrastructure in coming years. Yet the companies that will be relied on to pave the roads, build the bridges, lay the water pipes and assemble the trains aren’t yet planning to meet those needs, economists and industry insiders say.
And that’s even as they face immediate shortages—from steel and cement to the supply of labor—stemming from the unprecedented difficulties of a sudden reopening of the economy after last year’s shutdowns.
“There’s already a labor shortage in construction so you can’t throw a trillion-dollar nuclear bomb of money into the industry,” said Bassem Hamdy, chief executive officer of Briq, a company that runs cost estimates for construction firms. “If you don’t have workers, how will this ever happen?”
Construction firms are still excited for more business, but aren’t taking steps to boost hiring or move workers in anticipation of the package passing, Hamdy said. U.S. steelmakers aren’t boosting supply enough to meet expected demand. And tariffs on items including aluminum and lumber are hampering affordability.
Friday’s jobs report suggested continuing difficulties among some employers to ramp up hiring as the economy reopens, with payrolls rising less than forecast and wages jumping as companies try to lure workers.
The scarcities have caught the attention of the White House. Biden, touting his infrastructure plan during a visit to Cleveland, Ohio, last week, said his administration “will take steps to combat these supply pressures, starting with the construction materials and transportation bottlenecks,” with plans to be unveiled in coming days.
For all the “Made in America” push by both Biden and his predecessor, Donald Trump, American manufacturers are confronted with a legacy of historically mediocre growth over the past decade, and a future colored by lackluster U.S. demographic trends. These factors alone discourage companies from ramping up capacity, even amid dizzying prices.
Steel Prices
Consider steel, the price of which has skyrocketed about 225% to $1,665 a ton in the year to May 31. Biden’s legislation would increase demand for the material by 5% each year in the first five years of an infrastructure plan, or about 5 million tons per year, according to CRU Group, a commodities research firm.
Not Enough
Planned capacity coming online by the end of 2022 is only about 4.6 million tons a year, according to Bloomberg Intelligence analyst Andrew Cosgrove. That would squeeze prices and supply even more.
Yet U.S. Steel Corp., the country’s oldest maker of the metal, is pulling back on investing in its plants.
Chief Executive Officer David Burritt told shareholders in April he would be scrapping a more than $1 billion plan to rehabilitate a Pittsburgh steelmaking plant that dates back to Andrew Carnegie. The company has no plans to restart blast furnaces that it shuttered in 2020. Steel for infrastructure projects accounts for less than 1% of U.S. Steel’s annual revenue, according to data compiled by Bloomberg.”
Over at Charlotte, North Carolina-based Nucor Corp., rather than unveiling preparations for new mills, the company last month authorized a $3 billion stock buyback plan.