37 MAY 2022 WorldWide Drilling Resource® Recent Economic Impacts Affect Construction and HDD Industries Adapted from Information by Melfred Borzall Three key indicators represent a possible change in attitudes and outlooks for the construction and horizontal directional drilling (HDD) industries following the pandemic. 1. Skyrocketing demand for bandwidth pushes smaller product diameter bores and job types. Before the pandemic, in 2019, seven out of the ten fastest growing industries in the U.S. were related to the construction industry. Take that information and combine it with millions of Americans moving to online work, school, and social meetings, while also consuming exponentially more streaming media during lockdowns. The bandwidth demand created by the pandemic and infrastructure investment has carved a clear path for work relating to Internet bandwidth. In fact, U.S. demand for insulated wire and cable is forecast to rise 3% per year to $3.6 billion in 2025. With many industries finding remote work a lasting solution beyond the pandemic, this demand is unlikely to subside post-pandemic. A Deloitte Consulting analysis determined the U.S., “requires an investment of $130 - $150 billion in fiber infrastructure over the next five to seven years to adequately support broadband competition, rural coverage, and wireless densification.” With the unprecedented combination of private and public sector investment, HDD can expect quite a few infrastructure demands coming from telecommunications to be fiber-optic. For contractors accustomed to larger diameter bores for waterline, sewer, or gas and oil, this could mean a shift to investing in smaller tooling setups. It may also create a change in bidding strategies to win the inevitable wave of fiber-optic infrastructure jobs coming. 2. Low interest rates are making infrastructure investments more attractive. Incentivized by the historic low cost of debt, private investors are looking for some long-haul equity in public infrastructure where legislation has been funneling civil funding. Due to interest rate norms, private sector investment into public assets was not considered “bankable” prior to the pandemic. According to a perspective by Deloitte, institutional investors are very interested now because they, “have long investment horizons.” The pandemic’s impact on public equity markets could lead to a long-term rebalancing of the portfolio of these institutional funds. In other words, the opportunity has never been better for collaboration between private investors wanting long-term equity the public sector’s infrastructure can provide. With both heavily invested, HDD contractors are likely to have more infrastructure opportunities opening up for bidding on a scale unseen in past years. 3. The way HDD contractors do business is changing. Arecent study shows 76%of business to business buyers (such as a contractor buying from a supplier) still find it helpful to speak to someone before purchasing. In the HDD industry, the pandemic introduced challenges of working safely with distancing, among other standard safety protocols. The traditional salesman model suffered as HDD contractors were not able to receive salespersons delivering tooling, supplies, or equipment. Manufacturers, tooling suppliers, and equipment suppliers have all had to utilize technology to further support drilling professionals in the field. With e-commerce becoming more mainstream, construction and HDD industries are increasingly taking advantage of new possibilities for production and efficiency gains. C&G
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