Published March 2006

Construction industry panel
warns of possible material,
labor shortage

By John Wolcott
SCBJ Editor

Builders enjoying Snohomish County’s strong construction activity this year may run into some material shortages because the entire Pacific Northwest is a hot market for residential, commercial, industrial and public works projects.

A panel of major project owners recently told the Seattle-based Northwest Construction Consumer Council that some materials could see price hikes, too, as local, regional and global supply-and-demand forces put pressure on various commodities, including drywall and cement.

Laborers, too, are expected to be in short supply in many fields as skilled workers see their ranks stretched to handle a pipeline filled with both major and minor projects, they said.

For instance, Don Grimes, vice president of Glacier Northwest, the region’s largest supplier of cement products, said he’s “having trouble finding enough drivers, and they’re limited by the feds in their work hours, which can be a huge problem for us.”

Also, he said he sees “increasing cost for cement, aggregate and equipment in the concrete market, with much of the cement being imported into Washington from other states.”

Kim Robinson, regional engineer for the American Institute of Steel Construction Inc., a nonprofit organization, said construction steel is primarily made from scrap metal, noting that the problem is not supply but price.

“At the rate U.S. teenagers are wrecking cars, we can’t run out of scrap,” she quipped, “but China is paying more for scrap metal and steel, so we have to pay more. Price is the only issue.”

The situation is made worse, she said, by the fact that in the past year China has “gone from a net importer of steel to a net exporter of steel, primarily to developing countries such as South Africa, making them a new competitor in the world marketplace.”

As for metal framing products, prices are expected to be stable this year, predicted Joe Brosseau, purchasing manager for Vertecs Corp. in Seattle, with good supplies available through the summer.

Drywall, on the other hand, has been on allocation for the past year, he said. Although most Puget Sound suppliers will get all they want, he said, quarterly price increases are expected.

With five insulation producing plants down for maintenance nationally, suppliers already are limiting allocations to clients, he said, and surcharges to cover rising fuel costs for delivery trucks are still being seen in nearly all industries.

Tracy Robbins, area manager in the Seattle area for Walters & Wolf Inc., Mukilteo, suppliers of glass, glazing and exteriors of high-rise office buildings, told the group glass manufacturers continue to face high prices for the large amounts of electricity used in making products.

“Energy cost is a big item for us. The price of aluminum extrusions was up 10 percent in January over the prior year, but the price of glass is of more concern to us. With two major commercial fabricators in North America closed, the remaining plant has a 32-week waiting period. With new plants coming, prices should come down in six to 12 months. We’ve also seen gasoline prices increasing dramatically.”

Like the region, Snohomish County is expected to feel the impact of the robust economy in the region and nationally, said U.S. Bank regional economist John Mitchell, making his 10th annual Pacific Northwest economic outlook presentation to the NWCCC.

He foresees ongoing residential growth, increasing construction of health-care facilities for the aging population, higher state education budgets for more schools, rising hotel occupancy as tourism grows and strong port activity spurred by increased global trade.

Mitchell also noted strong aerospace industry production and employment is supporting an outlook for long-term employment growth at a faster rate than the national economy. Office vacancy rates in the Puget Sound region are declining, he said, and many commercial projects held back during the slower economy are under way again.

Summarizing major construction in the state, managers for BP and Shell refineries, the Washington state Department of Transportation and Sound Transit, the ports of Seattle and Tacoma, the University of Washington, the state General Administration office, Amgen, Vulcan and Boeing reported on their current and future projects:

• BP’s Cherry Point refinery is seeing a decline in Alaskan North Slope crude oil and is searching for replacement oil, including running some Canadian crude oil. The plant will have a host of small capital projects until 2015.
• Shell OPUS’s Anacortes refinery is wrapping up a $400 million investment program that began several years ago, the largest upgrade since the plant was built in the mid-1950s, with $30 million worth of work remaining this year.
• Sea-Tac International Airport has more than $400 million in projects this year, including further construction of the third runway, which will see concrete poured next year and a late-2008 opening. This month, bids will be invited for realignment of the north expressway into the airport, part of a $100 million investment to extend Sound Transit’s Link light rail project to the northwest corner of the parking garage.
• Sound Transit will invest $500 million this year in its light rail project, along with $440 million for its Sounder train system, including construction of several new stations and work on several regional bus transit centers.
• The University of Washington’s major focus for the next five to seven years will be on renovating older buildings on campus, beginning with Spector Hall, plus a $300 million construction program at Harborview Medical Center and a $100 million parking garage project at the Tacoma campus, with 125 apartments on top.
• With the new state gas tax to finance highway construction, the typical $1 billion of biennium construction by WSDOT in recent years will increase to a level of $3 billion in 2007-09 for projects throughout the state.
• Washington state’s General Administration office has 149 construction projects costing $780 million in the 2005-07 biennium budget, including $22 million for a new Arts and Science facility at Everett Community College; a $9.5 million theater and Mukilteo Hall at Edmonds Community College and $4.7 million to renovate Brier Hall; $5 million for SR-522 off-ramp construction at Cascadia Community College; and $2.2 million for an automotive coursework building at Shoreline Community College.
• Amgen, which employs 800 at its Seattle waterfront biotech site, also plans to expand its Bothell facilities in Canyon Park, where some 150 employees are engaged in research work.
• Vulcan Real Estate projects include its $200 million South Lake Union project for 261 condominiums, a Pan Pacific hotel and retail businesses, due to open this fall; The Martin, with 170 condominiums and street-level retail at Fifth Avenue and Lenora; and the 320 Westlake project, a full city block of mixed-use development that includes a new Group Health headquarters, beginning construction early this year.
• Boeing reported record sales of 1,002 aircraft during 2005 and plans for $100 million to $150 million in construction at the Everett plant for the 787 program, continuing at nearly the same level in 2007.
• Port of Tacoma’s 2006-2010 capital improvement budget includes up to $2 billion in projects, including $301 million already planned, $1.2 billion projected and $451 million in potential projects. Most of the projects will focus on marine terminal growth, industrial development and increased infrastructure capacity.

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