Contract Glazing

Report: Contractors Optimistic About Industry Health, Concerned Over Tariffs

Optimism abounds among contractors in the U.S. commercial construction industry about the current and future health of the sector.

USG Corporation and the U.S. Chamber of Commerce recently released their Q2 2018 Commercial Construction Index, which uses backlog levels, new business outlooks and revenue expectations to calculate findings in the report.

In the second quarter (Q2) of 2018, more than three-fourths of contractors reported steady or increasing backlogs, with 41 percent experiencing an increase in the past three months.

While finding work has been a point of optimism, finding skilled workers, especially those proficient in green building materials, has become a concern. Another growing concern is the price of materials due to tariffs.

Drivers in Confidence

Backlogs in Q2 were consistent with the ratio reported in Q1 of 2018, revealing a strong market with capacity for growth, according to the report.

The average backlog of 9.3 months is 73 percent of the average ideal backlog of 12.7 months for this quarter.

Of contractors surveyed, 96 percent report high to moderate confidence that the market will provide new business opportunities during the next 12 months. That’s down 2 percent from last quarter. Only 34 percent of contractors are highly optimistic about market potential during the next 24 months.

Slightly more than one-third of contractors expect an increase in profi t in the next 12 months, while less than two-thirds expect profi t to remain the same and 4 percent expect a decrease.

Nearly all of the 4 percent that re-ported an expected decrease are small companies with annual revenues less than $10 million.

Green Building

Eighty-one percent of contractors engage in some level of green building, but those numbers are decreasing.

In 2017, 40 percent reported that at least 31 percent of their projects were green. In 2018, that number dropped to 22 percent.

“General contractors retain a higher percentage of green projects in their overall workload, with an average of 22 percent green projects, compared with an 18-percent share among trade contractors,” reads the report.

Green projects made up nearly one-third of trade contractors’ work last year, and 29 percent of the work of general contractors.

It’s becoming increasingly difficult for general contractors to find green skilled labor. One-third reported having a high degree of difficulty in Q2 2018, up from 24 percent in Q2 2017.

Trade contractors also reported this challenge, but at the slightly lower rate of 30 percent.

Contractors in the West are more likely to perceive a competitive advantage to build sustainably, with 66 percent of contractors in the region reporting so compared to around one-third of con-tractors in the South and Midwest.

Workforce

While contractors are optimistic about the health of the U.S. economy during the next 12 months, they re-ported difficulty finding skilled workers.

More than half of contractors expect to employ more workers in the next six months, while 39 percent expect their workforce to remain the same. Sixty-five percent of small firms indicate having difficulty finding skilled workers, com-pared with 42 percent of large contractors (with a revenue of $100 million or more). Nearly two-thirds of trade contractors report difficulty finding skilled workers, compared to 48 percent of general con-tractors. The labor shortage appears to have hit harder in the South, Midwest and West than in the Northeast.

Concern over the availability of steel erection tradespeople has grown since Q1. The group is now tied for second in the skilled labor shortage ranking, up from sixth in Q1. Glazing is up to seventh place in Q2 from 11th in Q1.

Eighty-seven percent of contractors are moderately concerned about finding workers with adequate skill levels, while half are highly concerned. These numbers are down slightly from Q1.

Financing

During the past 12 months, only 18 percent of contractors reported concern over how materials cost fluctuations would impact their businesses. In Q2, that percentage has more than doubled. The possibility of tariffs and trade wars, as well as rising interest rates, have created uncertainty about material costs, according to the report.

However, contractors are still optimistic. Fifty-seven percent expect to spend on tools and equipment in the next six months.

“In the current quarter, nearly two-thirds (63 percent) of contractors report being concerned about cost fluctuations for steel. This is in sharp contrast to the highly consistent findings in all previous quarters, when only about one-third reported concern. This finding is clearly tied to steel tariff implementation,” reads the report.

The percentage of contractors concerned about the impacts of steel and aluminum tariffs (58 percent) is nearly the same as those concerned with skilled labor shortages (56 percent).

Nearly half of contractors expect a high degree of impact from potential new construction material tariffs and from trade conflicts with other countries, according to the report.

Steel tops the list of concerns, with 86 percent of respondents expecting to see at least moderate to severe impact on business in the next three years. Some contractors even suggest price increases could eventually have a negative impact on the volume of projects available.

AEC Applauds U.S. Custom’s Preliminary Finding of Duty Evasion through Malaysia

Both the Aluminum Extruders Council (AEC) and the Aluminum Extruders Fair Trade Committee (AEFTC) applaud the U.S. Custom and Border Protection’s preliminary decision to impose interim measures on importers Sun Bright International Corporation and Fair Importing Corporation for participating in a plan to evade duties using fake country-of-origin certificates.

According to the report, AEFTC provided evidence to reasonably suggest that the importers evaded anti-dumping (AD) and countervailing duties (CVD) by entering merchandise through a false statement, act or omission.

Information obtained by AEFTC reasonably suggested that the importers imported aluminum extrusions into the U.S. Import data linked to a falsified certificate of origin to a shipment of aluminum extrusions from the Malaysian manufacturer to Sun Bright as part of a plan to transship Chinese-origin aluminum extrusions through Malaysia.

The report also notes that AEFTC provided evidence to reasonably suggest that the importers were evading AD/CVD duties, for which no cash deposits were made, by entering the transshipped subject Chinese merchandise acquired via CK Aluminum and declaring it to be of Malaysian origin.

It was determined on May 14, 2018, that the allegation reasonably suggested that importers entered covered merchandise into the customs territory of the United States through evasion by a material false statement or act, or material omission, and an investigation was opened.

AEC president Jeff Henderson says his group is, “pleased to see this decision from Customs. The AEC and its members have worked tirelessly to expose these types of duty evasion schemes that undermine the relief provided by our anti-dumping and countervailing duty orders at the expense of American jobs. We are gratified by the administration’s efforts to vigorously enforce the orders and hold cheaters like Sun Bright and Fair Importing accountable. The AEC is committed to seeking out and exposing these and other types of duty evasion schemes. Anyone currently importing aluminum extrusions must be sure the products are not transshipped as they will be held accountable for duties and possible fines.”

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