As we reported in a previous blog, the global construction industry as a whole has been relatively technology-resistant over past decades. In recent years leading up to the pandemic of 2020, only 20% of construction companies could claim they were aggressively disrupting their business models for change or improvement. The pandemic has exposed an already-existing and ever-increasing demand for high-speed internet (which we’ll talk about later on in this article). Greater demand for smaller diameter jobs is contrasted by the Oil & Gas industry taking majore hits from the pandemic. In response, a massive $2 trillion infrastructure investment was announced that may drive to greater things than simple stimulus. This article will point out three indicators that may change the construction and HDD industries’ outlook since the pandemic that you may not have noticed.
1. Skyrocketing Demand for Bandwidth Pushes Smaller Product Diameter Bores and Job Types
Before the pandemic, in 2019, 7 out of the 10 fastest-growing industries in the U.S. were related to the construction industry. Already poised for growth, infrastructure jobs got a boost in April of 2021, when $81.73B closed on commitments to fund infrastructure jobs. This was an all-time high for infrastructure. Take that information and put it up against millions of Americans moving to Zoom work, school and social meetings and 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, the 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, the demand is unlikely to subside post-pandemic. A Deloitte Consulting analysis found that 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 there being an unprecedented synergy between private and public sector investment, HDD can expect quite a few of the infrastructure demands coming from telecommunications to be fiberoptic. If you are a contractor that is used to larger diameter bores for waterline, sewer, or even oi & gas, this will mean you may need to shift gears and invest in smaller tooling setups. It may also mean that you might need to change your bidding strategy to win the inevitable wave of fiber optic infrastructure jobs coming.
2. Low Interest Rates Grow Interest in Infrastructure Work
At the onset of the pandemic, the word “economic stimulus” became a household regularity. Many Americans relied on it for survival and HDD companies need the Payment Protection Plan (PPP) to stay in business. The financially unsure, were not the only ones to take notice though. 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. Private sector investment into public assets was not considered “bankable” prior to the pandemic due to interest rate norms, and that left HDD contractors finding jobs in either the private sector or public. According to a perspective by Deloitte institutional investors are very interested now because they, “have long investment horizons. The impact of COVID-19 on public equity markets could lead to a long-term rebalancing of the portfolio of these institutional funds.” That is a pretty high-brow way of saying the opportunity has never been better for collaboration between private investors wanting long-term equity that 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. Changes To How HDD Contractors Do Business
A recent study shows 76% of businesses 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 amongst 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 drillers in the field. Hybrid distribution models, with online ordering became not only a novelty, but vital to many HDD contractors. Melfred Borzall launched it’s e-commerce platform that educates, provides resources, and purchasing online in 2018, just before the pandemic. As a result, the pandemic expedited user involvement due to necessity and has thrust them over the mental hurdle of habit. Now official tooling distributors can spend more time on local support and relationships as non-value-add activities are reduced. This model is not an anomaly, but actually conforming to cross-industry B2B eCommerce trends as total U.S. sales skyrocketed with the pandemic.