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Special Report: Infrastructure

Broader ribbons

By Lynn Stanley

Above: Ninety-one percent of the nation’s bridges were deemed structurally deficient in 2016.

The nation’s failing infrastructure might be poised for a long overdue makeover

April 2018 - General Dwight D. Eisenhower understood the value of roads. This conviction arose after he participated in the U.S. Army’s first transcontinental convoy of military vehicles. The journey from Washington, D.C., to San Francisco took two months. During and after World War II, Eisenhower also made use of Germany’s Autobahn, a network of superhighways.

He said, “The old convoy had started me thinking about good, two-lane highways, but Germany had made me see the wisdom of broader ribbons across the land.”

During his presidency, Eisenhower signed off on the Federal Aid Highway Act of 1956 and by the end of his administration in 1961, 10,440 miles of the 41,000-mile Interstate System was opened to traffic, at a price tag exceeding $10 billion. Those years mark the last time America saw a national infrastructure project.

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188 million trips are taken every day across structurally deficient bridges.

Fifty-six years later, the American Society of Civil Engineers (ASCE) issued its 2017 quadrennial Infrastructure Report Card, which covers aviation, dams, energy, inland waterways, ports, railways, schools, solid waste, bridges, drinking water, hazardous waste, levees, public parks, roads, transit and wastewater. America received a D+, a grade ASCE defines as “poor to fair condition and mostly below standard, with many elements approaching the end of their service life. A large portion of the system exhibits significant deterioration. Condition and capacity are of serious concern with strong risk of failure.”

President Trump this year unveiled a plan to get the ball rolling on much-needed infrastructure repairs. And there’s a lot to fix. Trillions of gallons of water never make it to the tap because of leaky pipes. Utilities need critical information to balance electricity loads, identify failures and enhance power flow. The need for wastewater infrastructure exceeds $271 billion. Only 51 percent of households reported they could reach a grocery store using public transportation. Of the nation’s 614,387 bridges, almost four in 10 ffj 0418 infrastructure image2are above 50 years old. Commuters make 188 million trips across structurally deficient bridges every day.

“Our infrastructure is failing to keep pace with current and expanding needs and until now investment in our nation’s underlying framework has been woefully inadequate,” says ASCE President Kristina Swallow. “We have been underinvesting in maintenance for a generation. Our contractors and engineers have done a fantastic job with few resources but, at some point, a BandAid no longer works.

“Our infrastructure was primarily built in the 1950s and 1960s around the car. Today we are a different society, much more urban,” she notes. “In addition to increasing our investment, we need to modernize our infrastructure to support the way we now live and move.”

This is not merely a civil engineering problem. “It is the problem of every community and its members. It impacts our quality of life, our health and safety,” says Swallow.

Some statistics offer insight. ASCE research asserts the cost of deteriorating infrastructure decreases families’ disposable household income and impacts the nation’s economy in terms of job quality and quantity. From 2016 to 2025, each household can expect to lose $3,400 annually in disposable income due to infrastructure deficiencies. If these shortfalls are not addressed, the loss will balloon to $5,100 a year from 2026 to 2040, resulting in cumulative losses of nearly $76,200 per household from 2026 to 2040. The ASCE’s “Failure to Act Report” states that the domino effect of a neglected infrastructure will prevent some businesses from providing well-paying jobs and may reduce their earnings. If the investment gap isn’t bridged by 2025, the economy is expected to lose $4 trillion in GDP and 2.5 million jobs in 2025.

Doing the math

Swallow says President Trump’s infrastructure plan is a step in the right direction. “We’re glad to see it, though [we have] some concerns regarding the funding. The math needs to be done to see if it is feasible.”

Swallow is referring to the fact that the plan doesn’t feature $1 trillion in new federal spending. It pledges $200 billion and proposes to leverage $1.3 trillion in additional state, local and private sector spending. In short, it means generating a least $6.50 in additional infrastructure spending for every dollar the federal government contributes.

“Infrastructure needs a total $4.6 trillion in investment, leaving a $2 trillion gap,” says Swallow. “Of that amount, $1 trillion is surface transportation [roads, bridges and transit]. More than half of the states have already begun collecting dollars through such means as raising state fuel taxes. To address that gap, the federal government will need to step up to provide more than $200 billion. But the overall package is … a starting point [for] conversations with Congress.”

Ron Ashburn, executive director for the Association for Iron & Steel Technology (AIST), and Frank Bergren, president of Metal Partners International (MPI), also weighed in on the nation’s poor grade, the president’s infrastructure plan and the ripple effect of newly implemented Section 232 steel and aluminum tariffs.

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Metal Partners International fabricates and distributes 400,000 tons of steel per year. It is prepared to meet increased demand with brick and mortar and a new 50,000 tons-per-year epoxy rebar coating line.

Ashburn, who joined AIST in 2002, says that was the year the domestic steel industry found itself on the verge of extinction. “We had 43 domestic steel producers in bankruptcy,” he recalls. “I made the conscious choice to communicate just how important domestic steel production is to the economic and defensive security of any industrialized nation.”

Ashburn expects the ASCE Report Card, coupled with infrastructure spending, to create some favorable opportunities up and down the steel supply chain. The study indicates that “almost every category requires steel for maintenance and rebuilding. More than 40 percent of all steel goes into construction.” Roadways consume rebar; galvanized sheet forms guardrails, light towers and sign posts. Bridges require structural sections, plate, wire cable and fasteners. Energy infrastructure consumes an additional 10 to 15 percent of steel production.

ffj 0418 infrastructure image4Demand pull

“We see infrastructure generally consuming about a million tons of steel for every $20 billion spent,” he continues. “If we extrapolate those numbers to the president’s infrastructure plan, it comes to about 75 million tons of additional steel demand over the next 10 years.”

U.S. steel shipments last year reached 106 million tons, up 5 percent over 2016. “It’s a healthy increase for a developed market like the U.S,” says Ashburn. “If the infrastructure plan comes to fruition, demand has the potential to increase by about 7 percent, which would more than double its historic [annual growth] rate in good years.” In other words, new infrastructure projects “would be a boon for all steel producers,” he says. “And a growing market is a catalyst for investment. This country really needs to reinvest in its heavy industry and manufacturing base.”

MPI’s Frank Bergren agrees that taxpayer-supported infrastructure projects will drive investment in the U.S. economy. His firm, a supplier of rebar, epoxy-coated rebar, wire mesh, concrete accessories and dowel bars, is making decisions based on Washington’s pledge to proceed with work.

A fabricator is ready

MPI is DOT certified in several states for stock-length rebar, wire mesh and fabricated rebar materials and supports Leadership in Energy and Environmental Design (LEED) requirements. The company, which fabricates and distributes 400,000 tons of steel per year, has 25 stocking locations across the country and operates four large regional fabrication facilities in Bakersfield, California, Las Vegas, Hammond, Indiana, and New Castle, Delaware.

New Castle is the site of a new 220-ft.-long line that will apply epoxy coating to 50,000 tons of rebar per year. MPI purchased the building in March 2017 and is installing a $2.6 million line that is slated to ramp up production during first-quarter 2019.

The domestic market for epoxy-coated rebar exceeds 750,000 tons, says Bergren. “This new line will be a healthy addition [and will] allow us to be more competitive because of the logistical savings of having the plant closer to our Northeastern customer base.”

MPI opened a fab shop in Las Vegas early last year. Bergren cites the city’s economic growth, noting, “There is a huge demand for products like rebar.” The Oakland Raiders recently purchased 62 acres west of the Mandalay Bay Resort for a new stadium, which is projected to be ready for the 2020 NFL season.

MPI also expanded its footprint with the recent purchase of a fabrication company in Winfield, West Virginia. “We’ll conduct operations under the name Trinity Rebar,” Bergren says. “It gives us geographic reach into Ohio, West Virginia, Kentucky and Tennessee—regions we couldn’t typically reach with our Indiana and Delaware plants.”

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Commercial trucks traveled 777 million miles on U.S. interstate highways during 2015.

With brick and mortar and new production lines, MPI is preparing for the logistical bottleneck increased steel demand may create. The company operates 22 of its own trucks and books 50 to 75 common carrier truckloads per day to meet deliveries. Bergren explains that there isn’t “enough rail capacity to move product as quickly as we need it, so there is more pressure being placed on hauling rebar and other steel products by truck.”

Policies dovetail

Bergren foresees increased demand for both rebar and ways to haul it getting even more of a boost from the tariffs that the White House announced in March.

In February, the U.S. Department of Commerce found that the quantities and circumstances of steel and aluminum imports “threaten to impair national security,” as defined by Section 232 of the Trade Expansion Act of 1962.

Bergren who supported the Commerce findings and the White House’s order to impose tariffs, sees them as dovetailing into the president’s infrastructure plan, because both promote the use of domestic raw material.

“I am a proponent of invoking protection for domestic suppliers,” he says. “One component of this protection, however, should include the imposition of accountability on U.S. mills, which have tended to disregard the principles of market competition and made it impossible for independent producers such as us to fully source domestic rebar.” Because many domestic mills own their own rebar fabrication companies, it is difficult in times of rising demand for independent fabricators to obtain enough American-made product, compelling them to buy from foreign producers.

The executive orders impose tariffs of 25 percent on imported steel products and 10 percent on imported aluminum; products made in Canada and Mexico are exempt.

“The actions we are taking today are not a matter of choice; they are a matter of necessity for our security,” Trump said March 8. “Our factories were left to rot and to rust all over the place; thriving communities turned into ghost towns. The betrayal is now over.”

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Adjustments to come

“The entire marketplace is in shock right now and not sure of the real effect,” Bergren says of the duties, which took effect March 22. “I do believe that it can be supported and absorbed, despite everyone’s fears. The market will adjust and adapt accordingly.

“The major concern that I see is that there will be a shortage of supply in the U.S. with the lack of import flow. The mills will need to begin increasing capacity sooner rather than later,” he adds.

MPI is building its own trucking company to help support the industry’s evolving logistical needs.

“Once MPI’s fleet makes deliveries for our company, they will [then] be available to make runs for customers or other companies,” explains Bergren. “In addition to adding capacity, this could also lead to more jobs.”

Change can be a bumpy ride. Eisenhower knew that when he authorized construction of an interstate highway system. For nearly three years, members of Congress argued over the plan’s structure and how to pay for it with one critic calling it “New Deal jitterbug economics.” But Eisenhower had a vision, which is evidenced today by 4.12 million miles of road that carry the lifeblood of the nation. FFJ

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