Yes, It’s Time To Build
Since my last column, Kathy and I welcomed a grandson. Given COVID social distancing restrictions that kept us apart for longer than we liked, it was a surreal experience. But it still was a joyous one, and one that prompted thoughts about the future.
The country is in a fog now. A pandemic threatens our economy; we are just exiting a difficult election; and we need to contend with the racial injustice that plagues our society. For our continent, for our industry, and, most importantly, for many of our MSCI member company families, 2020 has been devastating. It is difficult to see the future now, but we must try. We cannot simply hope for a better tomorrow. We must build one.
Literally.
At our virtual Annual Meeting in June, you heard our board chair Eddie Lehner introduce the concept of “Yes, It’s Time To Build,” or YITTB. Eddie’s concept is the outgrowth of a column by American investor and entrepreneur Marc Andreessen that examined why the United States was so slow to meet the challenge of COVID. Andreessen did not blame one person or party for the slow-footedness, but instead identified “a failure of action” and “widespread inability to build” that has been present in the country for years.
The United States did not have enough ventilators, ICU beds, or even surgical masks at the onset of the pandemic. Why? Because we have been mired in a culture of complacency that also allowed us to watch as buildings have crumbled and supply chains – and jobs – have gone overseas.
As the pandemic has made clear, the consequences of not building, of not creating, are devastating. The biggest result for the industrial metals industry: North American steel and aluminum shipments are still significantly below our pre-Great Recession numbers.
The metals sector is in material decline – indeed, we face an existential crisis – in part because we are not building enough affordable housing, energy infrastructure, or even bridges, schools, and hospitals. Even with a small reopening recovery, according to MSCI’s Metals Activity Report, in October 2020 aluminum shipments were still 25 percent below their 2006 levels and steel shipments were down more than 40 percent.
Consider also the cost to Americans who are not part of the metals industry. According to an August 2020 study by the American Society of Civil Engineers (ASCE), between 2012 and 2018, the rate of water main breaks in the United States increased 27 percent. There is now a break every two minutes. These failures cost Americans $2 billion in 2019. That burden is expected to rise to $14 billion by 2039.
The Canadian government understands the need to build. Earlier this fall, that country’s leaders announced plans to invest $10 billion in infrastructure as part of its efforts to help industry recover from the coronavirus pandemic. That news came just before the International Monetary Fund called on nations to invest in infrastructure to hasten an economic rebound. As MSCI reported in Connecting the Dots, the IMF said increasing public infrastructure investment by one percent of gross domestic product in advanced and developing economies would expand those nations’ economies by 2.7 percent and create up to 40 million total jobs.
Across North America, we must shout: “Yes, it’s time to build.”
At MSCI we are preparing to carry this message into 2021 and beyond. With Keybridge Research, we are examining what is happening in the residential construction sector and what it could mean for the industrial metals industry. (By the way, if you missed Keybridge’s webinar on the offshoring of U.S. manufacturing and its effect on U.S. service center shipments, I encourage you to watch it now on MSCI’s YouTube channel.)
MSCI also is developing a tool that will allow you to share stories about how substandard infrastructure impedes your operations and how building again would help your company expand. The IMF and ASCE statistics cited above are important, but they are not as meaningful as entrepreneurs sharing accounts of how sustained public and private investment will keep doors open and jobs at home. Look for this exciting new platform in 2021.
The future of the North American industrial metals sector is tied to government and private sector leaders’ willingness to invest in infrastructure. Regarding innovation, the poet and novelist Victor Hugo said, “There is only one thing stronger than all the armies of the world, and that is an idea whose time has come.”
Building again in North America? Yes, it’s time.