Researched by Industrial Info Resources (Sugar Land, Texas)--In 2017, the Houston metropolitan area has been experiencing a consistent pattern of skilled labor shortages in certain crafts. Hurricane Harvey and its aftermath will only exacerbate an already tight market. The affected areas include Harris County, the Houston Ship Channel, Baytown, Texas City, Galveston and Freeport, which have shortages of local journeymen in 10 of the 12 studied crafts. A tight labor market has allowed for extra compensated journeymen in several crafts, including scaffold builders, pipefitters/plumbers, boilermakers, operators and welders. Industrial Info expects that millwrights and electrical and instrumentation persons will be in high demand for plant re-commissioning.

Industrial Info forecasts that the process and industrial construction markets will be affected by the larger requirements associated with infrastructure and residential/commercial labor requirements of laborers, painters (coatings), electrical, soft crafts generally and operators (which were in high demand prior to Hurricane Harvey).

Houston construction labor competes with Corpus Christi, Texas, and Lake Charles, Louisiana, which are paying higher wages and per diems to attract labor to the large mega projects that have been underway for several years now.

Anecdotally, Industrial Info is hearing that some owners and contractors are paying $85 per day per diem without travel restrictions. This is not necessarily a new practice, as owners and contractors have paid per diems, completion bonuses and other compensation in lieu of raising wages as a means of attracting labor these past few years.

This tight labor market with specific ongoing shortages will be further exacerbated by the lingering effects of Hurricane Harvey. This historic storm arrived August 24 and dropped nearly 25 trillion gallons of water over the Gulf Coast region, causing an estimated $190 billion in damage.

Owners with two-, three- and four-week turnarounds or outages/shutdowns will experience a tougher and tighter labor market, as craftsmen prefer longer-term jobs rather than short term.

Specific facility impacts, broken down by industrial segment, are as follows:

  • In the Refining segment, Hurricane Harvey began its trickle-down on August 24: It had the potential to impact 20 plants overall and ended up affecting six of them (only 16% of capacity was offline). By August 28, nine of the refineries were impacted and offline (or about 56% of capacity). Finally, by September 11, the plants affected had dropped to five, with only about 31% of the capacity being offline.
  • Regarding ethylene facilities, August 24 brought on the potential of 14 plants being affected, while only four went offline (or about 21% of capacity). However, by August 28, nine plants were impacted, with approximately 70% of capacity offline. As of September 11, only 35% of the capacity remained offline.
  • As for gas processing (including fractionation and processing), only two of the 94 potentially impacted plants were offline on August 24. Fractionation alone had 14% of the capacity that was offline. On August 28, 17 of the 94 plants were affected and offline. By September 11, that number had dropped to 11.

IIR has determined that most plants across the spectrum will be back online by September 15, with just a few outliers of substantial capacity that will be down well into October.

At this time, the pivotal questions won't focus on how the re-commissioning of these affected plants will influence the Gulf Coast Labor Market. These storm impacts are part of the picture, but not the primary focus.

Instead, it will be important to assess how the delays at construction sites already in progress (which are already at high/historical levels of current man-hours) will affect the labor market. These uncompleted projects will have new shortages to face when the large number of construction starts begin, many slated for kickoff in the fourth quarter of 2017.

There are 20 active and unconfirmed capital projects, worth nearly $2.6 billion, in Harris County alone that are currently expected to kick off construction in the fourth quarter of this year. This does not include the balance of projects in the Greater Houston metropolitan area. These new construction starts will join the frenzy in the Gulf Coast Labor Market, which is already struggling to handle the 42 capital projects (worth $7.4 billion) that are now in the construction phase in Harris County.

Even in the forecasts prior to Hurricane Harvey, this region's level of demand for skilled labor was quite substantial, even verging on near historic levels. The results of this storm will only prove to bump that demand a bit higher.

For more information, reach out to Tony Salemme at
tsalemme@industrialinfo.com
or 1-800-762-3361.


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