Mentions of “re-shoring,” “near-shoring,” and “on-shoring,” referring to relocating manufacturing back to the home countries, have seen an impressive 216% increase year-over-year since the start of 2022, as per data from Bloomberg.
This trend has triggered an influx of $516 billion in private company investments since the inauguration of President Joe Biden.
What Happened: The re-shoring wave, on the rise since the Trump era, has been further fueled by trade wars and the challenges of the COVID-19 pandemic, which exposed the vulnerabilities of global supply chains.
Issues such as port backlogs, blockages in the Suez and Panama canals, and rising automation and freight costs have made re-shoring a more economical option.
Companies like Sterling Infrastructure (NASDAQ:STRL) are reaping the benefits of this shift, with its market value skyrocketing by 506% in the last four years. Firms including Quanta Services Inc. (NYSE:PWR), TopBuild Corp. (NYSE:BLD), Emcor Group Inc. (NYSE:EME), and Fluor Corp. (NYSE:FLR) have also seen substantial rallies.
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The need for nearshoring-related construction spans various sectors, from life sciences and hospitals to technology. Progress in artificial intelligence has spurred demand for data centers, leading to sales growth between 20% to 30% in recent years.
International firms like South Korea’s Hyundai Motor Co. and California-based Rivian Automotive Inc. (NASDAQ:RIVN) are also bolstering U.S.-based manufacturing. Construction and manufacturing expenditure hit $198 billion on an annualized basis in August, marking nearly a 66% surge from the prior year.
Why It Matters: The growth of re-shoring is driven by market forces, government stimulus packages, and incentives for local manufacturing of items such as semiconductors and electric vehicles. Strained US-China relations also add to the allure of nearshoring.
Furthermore, a rebound in U.S. manufacturing activity in September 2023, as indicated by the ISM Manufacturing PMI reaching a 10-month peak, suggests the sector is recovering from a prolonged slump, according to a report on Benzinga. This robust manufacturing activity aligns with the current trend of re-shoring and is likely to further fuel the construction boom.
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