BusinessReport.com

The construction business is cyclical, so it’s not unusual to see an upswing.

What is unusual, James Construction Group CEO Mike Killgore says, is for all the major sectors of the construction business, including residential, commercial, infrastructure and industrial, to be up simultaneously.

“This is the first time in 30 years I’ve seen all of them at the top of their curves at the same time,” Killgore says.

Like most of the companies on this year’s Top 100 Private Companies list that are involved in industrial construction, James saw a big bump in revenue in 2006, going from $204 million in 2005 to $320 million and landing in the top 10 after ranking 13th last year.

Most of Killgore’s colleagues believe the trend will continue for at least a couple more years. But the question of how long the boom will continue, and how loud it will be, may depend on how well Louisiana addresses longstanding problems that have only become more acute since the 2005 hurricanes.

The peaks and valleys of the petrochemical business happen more or less like this: Plants build or expand based on what they perceive to be the market demand for their products. They run the new equipment for a while, which allows them to find out what their new production capacity is and how much of their product the market really wants. If, after a while, the market wants more of it, the plants may build more so they can make more.

Investments in chemical plants and refineries, the bread and butter of the local industrial construction business, was down in the early half of this decade. But both industries have made significant investments in recent years throughout the Gulf Coast.

Connie Fabre, executive director of the Greater Baton Rouge Industry Alliance, says that’s largely attributable to the overall upswing in the national economy. The U.S. chemical business depends increasingly on domestic sales, she says. So greater American demand for everything from hospital gowns to housing supplies to car seats obviously creates a need for more raw materials.

She says refineries may have held off on starting many new projects in the early part of the decade. But with the high price and high demand for oil bringing in more money, we’re beginning to see some of the first major expansion of refining capacity in 30 years.

The projected $3.2 billion expansion at Marathon Oil’s refinery in Garyville will likely involve several companies on the Top 100 list, just to name one major project.

“The building of power plants should also be very strong for the next decade,” Fabre adds.

The building cycle was already on an upswing, perhaps nearing the top, in 2005. Then hurricanes Katrina and Rita created, if you’ll forgive Turner Industries CEO Roland Toups’ term, “the perfect storm for our industry.”

Even without many new project announcements, the ones that are already in the pipeline should keep folks busy for at least the next two to three years. Meanwhile the post-Katrina rebuilding effort could last for the next 10 to 15 years, says Toups, whose company ranks second on this year’s Top 100 list at $1.49 billion.

But there are some familiar issues that have the potential to slow things down. The high price of natural gas was reportedly one of the reasons that German steelmaker ThyssenKrupp decided not to build a multibillion dollar steel mill in St. James Parish, and Louisiana continues to be dogged by the perception of corruption, a low-performing education system and a lack of confidence in the political leadership, many say.

One thing everyone in the industry agrees on is that Louisiana has a serious shortage of skilled labor. This was a problem even before the hurricanes.

“There’s definitely a qualified workforce shortage out there,” says Jerry Rispone, president of Industrial Specialty Contractors. “It’s not something you fix overnight.”

The shortage has driven average wages up anywhere from 25% to 40% since the storm, depending on whose estimate you use. Numbers like that could easily dissuade a corporation from building in Louisiana. And in some cases, it becomes an open question whether enough workers can be found even at the inflated prices.

Rispone says ISC isn’t in a panic mode, and expressed pride in his company’s recruitment, training and retention plan. Part of the problem may be the image of the construction industry itself.

“We have to let kids know that there are options for careers, and most don’t involve college,” Fabre says.

Students often don’t realize the technical skills and high pay that go along with many industrial jobs. Companies in the industrial alliance “adopt” local schools, Fabre says, and those sorts of outreach programs can help get kids interested. She said it might help if there was an organized program to reach those kids’ parents, many of whom still think of college as the only path to success.

The Louisiana chapter of Associated Builders and Contractors runs two craft training campuses for adults in Lake Charles and New Orleans. Students can work as a helper during the day and hone their skills through ABC’s night classes.

But the ABC schools graduate about 600 people a year, Fabre says, which amounts to little more than a trickle compared to the need; some estimates indicate the state will need 185,000 skilled craftspeople by 2012. Enrollment in the Louisiana Community and Technical College System is growing rapidly, but Louisiana’s system is 40 years behind what other states are doing, Toups says.

“We have got to develop a skilled workforce, and do it in a hurry,” Toups says, while acknowledging that it’s easier said than done.