While trying to gauge the extent of the construction decline
can be a confusing task, one thing clear is that the steel
conduit market is "in the dumps," pushed down by a weak
non-residential building sector that is still trying to find
the bottom, several market sources said.
Conduit demand tends to be very closely connected to
non-residential construction activity, according to Christopher
Plummer, managing director of Metal Strategies Inc., West
Chester, Pa., although some conduit-used to protect electrical
wiring from corrosion, certain magnetic fields and from
physical damage - also is used in public works infrastructure
construction and for apartment and other multi-family
construction in certain regions of the United States.
U.S. conduit demand reached its recent peak of about 600,000
tons a year in 2000-01 before dropping significantly to
slightly more than 400,000 tons in 2002, Plummer said. It
remained in the 425,000- to 500,000-ton-a-year range through
2005 before picking up to just below 550,000 tons in 2007 and
about 575,000 tons in 2008. But it has plummeted this year.
While conduit use has held fairly steady compared with other
competitive methods like cabling, all wiring methods have been
impacted by the decline in construction, according to Michael
Johnston, executive director of standards and safety at the
National Electrical Contractors Association, Bethesda, Md.
"With both non-residential construction and housing so weak,
business for conduit is in the dumps," Paul Vivian, a principal
at Preston Publishing Co. Inc., St. Louis, said. He estimates
that demand for conduit has fallen about 55 percent from
Conduit demand has been "really falling fast and could get
at least a little worse, although the rate of decline could be
starting to slow," Vivian said, adding that the current
weakness in the market really started to take hold in January
or February, when certain projects that had been on the books
started to be completed, or were delayed or canceled. Very few,
if any, new orders have been added to the project pipeline.
"Businesses are holding their cards close to the chest due
to the weak economy," Johnston said, "and likely will continue
to do so until there is some increased comfort level that the
economy and the credit situation has started to improve."
The fact that non-residential construction is currently down
isn't all that surprising. "It tends to go through five- to
10-year cycles, and we were due for a cyclical downturn anyhow,
" said Plummer. "But certain negatives in the U.S.
economy-including tight credit and high unemployment-has made
the downturn more severe.
Measuring the change in non-residential construction is very
complicated. There are two ways to do so, and each seems to
give a very different picture of the market. The U.S. Commerce
Department's "put in place" construction spending statistics
indicated the market was up 1.7 percent in the first quarter
vs. a year earlier, while certain "billings" or "new order"
indices-such as those from Reed Construction Data of Norcross,
Ga., and the American Institute of Architects-indicated a 26-
to 47-percent decline year to date through April, the latest
month for which statistics were available.
Ken Simonson, chief economist for the Associated General
Contractors of America, Arlington, Va., said the strength in
the government's "put in place" statistics was driven mainly by
certain large refinery projects, ThyssenKrupp AG's new steel
mill in Alabama and other large projects under way for several
Manufacturing construction is very likely to shrink soon,
even on a "put in place" basis, he said. Valero Energy Corp.,
for example, said it will indefinitely suspend a $1.7-billion
hydrocracker project at its Port Arthur, Texas, site.
The controversial "Buy American" provisions in the American
Recovery and Reinvestment Act also might contribute to slowing,
rather than stimulating, the construction market. A wastewater
treatment project in Overland Park, Kan., reportedly has been
held up by uncertainty over whether a piece of Austrian-made
co-generation equipment qualifies for a waiver from the
requirements of the legislation, Simonson said.
Much of the weakness in the non-residential construction
market, and therefore conduit, has been a credit issue, Vivian
said. "No one is making loans on anything that isn't absolutely
guaranteed to bring in an immediate return," he said.
"Once the economy starts to show signs of stabilization, we
should start seeing more construction money released, but that
will not likely be until 2010-11," Johnston said.
Views are mixed as to whether the stimulus funds will
benefit conduit. "I think eventually it should help, but
conduit mills and distributors aren't seeing it yet," Vivian
If there is to be any benefit, it will be largely on the
public works side, which accounts for a very small portion of
the total conduit market. "Meanwhile, there doesn't seem to be
any logical reason why there should be much secondary benefit
from the economic stimulus plan on commercial or industrial
construction," which accounts for 80 to 85 percent of conduit
consumption, with the rest divided between public works and
multi-family residential construction, he said.
This year will be at best a survival year for the conduit
market, with demand down at least 50 percent, according to
Vivian, noting that there could be a slight improvement in 2010
"simply because demand will not likely fall all year as it has
in 2009. But the real question is what will happen in 2010,
once many current projects are completed. It depends on what
happens with the economic stimulus package and whether credit
begins to flow."