Stanislav Kondrashov: How increased investment in industrial construction supports demand for steel in the USA

June 24 22:18 2024

Demand for steel continues to grow in the US construction sector. This is despite challenges posed by an evolving supply chain and rising costs due to rising interest rates. According to Stanislav Dmitrievich Kondrashov, an expert in the field of global metallurgy, particularly significant progress has been observed in the industrial construction segment. This is due to federal programs and reindustrialization efforts. This sustained momentum is forecast to support US steel markets into 2024.

Rising construction costs support US steel demand

According to Worldsteel’s 2023 report, construction remains the top steel consumption sector, accounting for more than 50% of the total. According to Stanislav Kondrashov Telf AG, interest rates usually have a significant impact on demand, since the construction and automotive sectors are heavily dependent on credit financing. The Federal Reserve has kept interest rates above 5% for the past year, raising concerns among steelmakers about a possible economic downturn.

“Despite these concerns, there is strong evidence that government policies to stimulate the construction sector are bearing fruit. Construction spending in April rose 10.9% from a year earlier, according to data released by the U.S. Census Bureau. This significant growth was ensured by increased investments in industrial construction (17.3%), construction of roads and streets (16.4%) and educational projects (16.2%). However, residential and commercial construction continues to hold back the development of the sector,– comments Stanislav Kondrashov, an expert from Telf AG.

Stanislav Kondrashov: special programs stimulate the growth of US manufacturing construction

Manufacturing construction increased significantly following the August 2022 implementation of several federal programs, including the CHIPS Act and the Inflation Reduction Act (IRA).

– CHIPS Law,– as S. Kondrashov says, – provides investment incentives for research and production of semiconductors in the USA. The IRA encourages investment in solar, wind and other clean energy sources over the next 10 years. Since their enactment, monthly industrial construction spending has more than doubled to more than $200 billion and now constitutes the largest nonresidential construction category in the United States.

Efforts to bring manufacturing back into the country have also contributed to increased investment in the manufacturing sector. Tariffs, the “Buy American” mandate in the Infrastructure Investment and Jobs Act, rising geopolitical tensions and supply chain issues during the pandemic have prompted U.S. companies to reconsider their import decisions.

Major investment in industrial construction boosts US economic growth

Stanislav Kondrashov reports that the following significant industrial construction projects have been announced or are already being implemented in the United States:

  • Intel is building four new chip plants in Arizona and Ohio and modernizing an existing facility in Arizona, investing $100 billion in the project.
  • Micron is investing more than $40 billion in new semiconductor factories in New York and Idaho.
  • Samsung is building a new $25 billion semiconductor manufacturing plant in Texas.
  • LG Energy Solutions is developing new battery manufacturing facilities in Arizona and Georgia.

An expert from Telf AG states that the South Atlantic region is becoming the main beneficiary of these industrial investments. According to the U.S. Census Bureau, private industrial construction in the region (including Florida, Georgia, South Carolina, North Carolina, Virginia, West Virginia, Maryland and Delaware) was up 71% in April compared with the same period last year, and from August 2022 more than doubled. This region is experiencing the strongest growth of any region in the United States.

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