January 2022 ONeal Steel Market Informer on iPad

U.S. Manufacturing Rising

Several enormous, almost outrageous U.S. manufacturing expansion plans erupted in 2021. In March, Intel Corp. announced that it would construct two new computer chip factories at an investment of $20 billion. Six months later, the manufacturer broke ground on that promise. In April, Nacero Inc. said it would build a lower carbon gasoline manufacturing facility in Penwell, Texas: $6.5 billion to $7 billion in estimated spending. And one of biggest announcements occurred in September, when Ford Motor Co. announced BlueOval City and BlueOval SK Battery Park, two mega complexes planned for Tennessee and Kentucky to support the automaker’s electric vehicle growth plans. In partnership with SK Innovation, the $11.4 billion investment is estimated to eventually create some 11,000 new jobs. That’s big. If plans remain on schedule, production will begin in 2025.

These announcements build on several known challenges facing the manufacturing industry: the growth of EVs, the lack of semiconductor supply (as well as the geographic imbalance of chip factory locations) and the focus on low-carbon living. Nevertheless, as big as these announcements are, they represent just a fraction of the new manufacturing facilities, revamped existing facilities and expansions that were reported or are underway in 2021 across the U.S.

As has become a year-end tradition at IndustryWeek, it is time again for review of manufacturing expansion across the U.S. We looked at some numbers, dropped in on two manufacturers that recently have broken ground—fitness company Peloton Interactive Inc. and solar module maker First Solar Inc.—and shared a short menu of manufacturers who in 2021 reported plans to build new sites (plus one recent opening). Our takeaway: There’s a lot to be excited about when it comes to U.S. manufacturing, even as the industry battles against significant headwinds.

The Data 

First, let’s discuss a few numbers to help define the manufacturing construction landscape. Construction starts took a big hit in 2020, according to data shared by the Dodge Construction Network, which tracks the commercial construction industry. The decline likely is not surprising, given the devastating collapse of the manufacturing industry in the second half of the year due to COVID. Petrochemical plant starts were down 72% in dollar value compared with the previous year, and manufacturing retreated by 33%.

Dodge Data Manufacturing Petrochemical Plant Starts 2021

This year’s data tells a different story, with manufacturing plant starts up by 82% year over year, and petrochemical plant starts up by 153%.
“Manufacturing construction is advancing in 2021 on the back of several notable projects, including petrochemical plants. Outside of petro activity, manufacturing construction related to motor vehicles and parts (such as battery plants for EVs), food-related production and chip fabrication plants are moving forward,” says Richard Branch, chief economist for Dodge Construction Network.

The manufacturing construction advance is marching in step with industry’s improving fortunes. Manufacturing activity has been growing for 17 consecutive months as of October, according to the Institute for Supply Management data, rebounding robustly. Despite the bounce back, however, manufacturers continue to struggle finding people and getting materials to build product.

Branch noted the challenge—and opportunity: “The supply chain issues that the economy is facing will continue to exert positive pressure on manufacturing construction in the years to come in the sense that domestic producers will want more control over their supply chain and more options for supply other than international sources. That, of course, is a huge positive for manufacturing construction starts. This potential, however, is not without its challenges. The manufacturing sector is facing a severe shortage of skilled labor that will inhibit growth.”

Source: IndustryWeek, 12.15.2021

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