In today’s US construction news, learn that Construction of new homes in the United States increased by 21.7% in May compared to the previous month as a result of rising demand and the dwindling supply of existing properties. Furthermore, a trade group in the United States (US) has expressed concern that the industry could see significant price increases as a result of forthcoming regulations on the origin of construction products and materials. The goal of the Build America, Buy America Act (BABAA), which was adopted as part of the Infrastructure Investment and Jobs Act in 2021, is to increase the federal government’s procurement of domestic goods and services. Finally, In 2022, thanks to a decade of increasing shale gas finds and a boom in LNG plant construction, the United States surpassed Qatar as the world’s largest LNG producer by installed capacity. This year, U.S. LNG exports are expected to hit 12.1 bcfd, and next year, they’re expected to hit 12.7 bcfd.
May Had the Fastest Us House Construction Increase in Over a Year
In May, US home development rose 21.7% from April due to low inventory in the current housing market.
The Census Bureau said Tuesday that housing starts, a gauge of new home building, exceeded estimates by 0.1%.
In May, units grew to a seasonally adjusted annual rate of 1.631 million, exceeding estimates for 1.40 million and the revised April estimate of 1.34 million.
Building permits increased in May after falling in March and April. Permits rose 5.2% from April’s revised -1.5%.
Builder confidence rises with low inventories.
As current homeowners hunker down with ultra-low interest rates, the National Association of Home Builders’ Monday survey found that home builder sentiment remains high.
The National Association of house Builders/Wells Fargo Housing Market Index analyzes current sales, buyer traffic, and new construction house sales over the next six months.
The indicator rose again in June, marking the sixth consecutive month of builder confidence growth and the first time sentiment levels have above 50 since July 2022.
According to NAHB chief economist Robert Dietz, “A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year.” “The Federal Reserve nearing the end of its tightening cycle is also good news for future market conditions in terms of mortgage rates and the cost of financing for builder and developer loans.”
The Federal Reserve and Washington policymakers must evaluate how home building affects inflation and monetary policy, Dietz said.
He remarked, “Shelter cost growth is now the leading source of inflation, and such costs can only be tamed by building more affordable, attainable housing—for-sale, for-rent, multifamily and single-family. “By addressing supply chain issues, the skilled labor shortage, and reducing or eliminating inefficient regulatory policies like exclusionary zoning, policymakers can play an important and much-needed role in the fight against inflation.”
Alicia Huey, NAHB Chairman, noted that builders’ optimism is excellent for home purchasers due to low inventory and supply chain improvements.
“However, access for builder and developer loans has become more difficult over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows.”
Overall, builders are steadily reducing sales incentives, indicating optimism about buy demand.
Builders reducing prices to encourage sales fell to 25% in June from 27% in May and 30% in April. It has progressively fallen after peaking at 36% in November 2022.
The average price reduction for a new home was 7% in June, down from 8% in December 2022. In June, little over half of builders gave incentives to purchasers, down from 62% in December 2022.
Why Contractors Worry the “Buy America” Strategy Would Raise the Cost of Building in the US
A US contractor association cautioned that upcoming laws on building product and material origin could raise prices.
The Build America, Buy America Act (BABAA), passed in 2021 as part of the Infrastructure Investment and Jobs Act, encourages the government to buy US goods and services.
BABAA mandates all iron, steel, manufactured products, and construction materials permanently installed on federally assisted infrastructure projects must be made in the US.
Federal agency heads can make exceptions by posting a proposed waiver online for 15 days for public comment.
The statute is in effect, but the regulations aren’t.
The rules are still being decided by major federal bodies including the US Department of Transportation (US DOT).
“As we understand it, most states are still accepting bids that have a note at the bottom that says contractors cannot guarantee these projects comply with anticipated Buy America rules,” an Associated General Contractors of America (AGC) spokeswoman told International Construction.
Concerns of contractors
However, contractors worry that the restrictions will raise prices at a time when businesses are only starting to recover from inflation and supply chain upheaval.
When the Buy America advice takes effect, association executives warned it will “severely limit” contractors’ material supply and raise prices.
They emphasized that the new rules are “so strict” that many US-made products will not meet because some of their materials come from elsewhere.
An AGC official cautioned, “There is a real possibility that they will require 100% of products to be manufactured and sourced in the US.”
That may mean that every screw used on a construction project must have been molded and made in the US.
“A contractor in Florida is building a rest stop with a generator,” the official stated. The generator is built in the US, but several of its minor parts are not, thus it doesn’t qualify.
They further stated that US DOT will require all aggregates and cement in concrete to come from the US, which would limit the supply of concrete from Mexico.
US DOT pointed International Construction to a BABAA FAQ on its website.
“Federal officials are attempting to wish away a diversified global supply chain for construction materials by regulatory fiat,” said Stephen E. Sandherr, the association’s CEO.
“All of us want more domestic manufacturing, but the reality is that it will take years – if ever – before those factories make products that are entirely sourced within the U.S., as the administration is seeking to mandate.”
US LNG Project Approvals Are Expected to Reach Record-breaking New Volumes
Original Source: US LNG project approvals on track for record new volumes
U.S. liquefied natural gas (LNG) developers are on target to approve three export projects capable of processing 5.1 billion cubic feet per day (bcfd) of gas in the first half of the year, a record for new LNG projects.
Due to a decade of shale gas finds and a surge in LNG plant building, the U.S. became the world’s largest LNG producer by installed capacity in 2022. US LNG shipments are expected to reach 12.1 bcfd this year and 12.7 bcfd next year.
The latest approvals are reducing the backlog of projects seeking financial backing and long-term clients. Analysts expect approvals to continue this year due to fuel demand.
“We expect global LNG demand to grow from 399 million tonnes in 2022 to 627 million tonnes by 2035, more than a 50% increase,” said S&P worldwide Commodity Insights’ global gas strategy head Michael Stoppard.
U.S. LNG developers have approved the building of two projects this year: Venture Global LNG’s second 1.2-bcfd phase of Plaquemines in Louisiana and Sempra Energy’s (SRE.N) 1.8-bcfd Port Arthur in Texas.
NextDecade Corp (NEXT.O) expects the first 2.1-bcfd phase of its Rio Grande LNG project in Brownsville, Texas to be approved by month’s end. It stated production might start in 2027.
After finalizing construction and financing agreements, corporations can begin substantial construction with final investment decisions (FID). New LNG plants take three to five years to produce their first LNG.
The combined 5.1 bcfd of gas is the largest approved in one year since 2014, when three projects with 4.9 bcfd capacity were approved. The seven U.S. export plants can convert 13.8 bcfd of gas into LNG.
Some LNG export projects, which have been in development for years, hope to find enough clients to get approval this year.
Analysts have named Delfin Midstream’s 0.4-bcfd offshore Louisiana project and Venture Global’s 1.3-bcfd Calcasieu Pass 2 (CP2) project as frontrunners.
Four U.S. LNG plants are under construction: QatarEnergy and Exxon Mobil Corp (XOM.N)’s 2.4-bcfd Golden Pass joint venture in Texas, Venture Global’s 2.9-bcfd Plaquemines, Cheniere Energy Inc.’s 1.5-bcfd Corpus Christi LNG expansion, and Sempra’s Port Arthur.
From 2024 to 2028, U.S. LNG export capacity will increase from 15.3 bcfd to 22.3 bcfd.
Qatar and Australia have 10.1 and 11.5 bcfd LNG capacities, respectively. With the North Field expansion in Qatar around 2025 and the Pluto expansion in Australia around 2026, that will climb to 14.3 and 12.2 bcfd, respectively.
Summary of today’s construction news
To sum it up, In June, new home prices dropped by an average of 7%, less than the 8% drop seen in December 2022. About 58% of construction companies offered discounts to customers in June, down from 62% in December 2022.
Furthermore, Contractors worry that when the restrictions take effect, they will raise prices just as they are recovering from inflation and supply chain upheaval. When implemented, new Buy America standards will “severely limit” contractors’ material supply and raise prices, according to association leaders. The new rules are “so strict” that many US-made products would not meet them because some of their materials are imported.
Finally, In 2028, the U.S. will export 22.3 bcfd of LNG. Qatar has 10.1 bcfd and Australia has 11.5 bcfd of LNG capacity. With the North Field expansion around 2025 and the Pluto expansion around 2026, Qatar and Australia will reach 14.3 and 12.2 bcfd, respectively.