Dive Brief:
- Construction material prices edged down 0.1% from November to December, showing that the industry was able to stave off inflation for another month and leaving 2017 with a year-over-year increase of 5%, according to the Associated Builders and Contractors (ABC).
- The materials with the biggest increases from November to December were natural gas (13.7%), unprocessed energy materials (4.7%), crude petroleum (1.8%) and iron and steel (1.7%). Crude petroleum (16.4%), softwood lumber (14.3%), iron and steel (8%) and steel mill products (7.8%) had the biggest year-over-year increases. Softwood lumber (-1%) was the only material to decline from November to December, and natural gas (-6.3%) was the only input to decrease year over year.
- ABC Chief Economist Anirban Basu said December's near-stagnant price movement could be the exception in a robust construction economy, and that inflationary pressures will likely materialize as the next few years unfold.
Dive Insight:
A too-narrow narrow gap between natural gas and crude oil prices contributed to the decision that South Africa-based chemical and energy company Sasol made to cancel its plans to build a $15 billion gas-to-liquids (GTL) factory in Louisiana next to its $11 billion ethane cracker plant. When those prices do not differ very much, the energy giant said, it's hard for it to make back its investment. As a result, Louisiana lost out on the investment, jobs and other benefits that the GTL factory would have injected into the local economy.
Natural gas is gaining popularity because it’s considered a cleaner alternative to coal and oil, so many local and regional energy companies are investing in it. In December, the Lansing (MI) Board of Water and Light announced plans to build a $500 million natural gas plant this year to replace an existing coal-powered facility. The plant is part of the board's effort to generate 30% of its electricity from cleaner sources by 2020. The utility also uses wind and solar energy.
Natural gas also feeds ethane cracker plants as ethane is a component of natural gas. In addition to Sasol's plant in Louisiana, Shell Chemicals is building a $6 billion ethane cracker facility in Potter Township, PA. Shell expects to employ about 6,000 construction workers at the peak of building activity. ExxonMobil and Saudi Arabia-based Sabic should start work on their $11 billion Texas ethane steam cracker plant in 2019, and, when it's complete, the Corpus Christie-area facility will be the largest plant of its kind in the world.
