Data on shipments and capacity utilization provided by the American Chemistry Council, Arlington, Va., for CP's monthly Economic Snapshot clearly show that the U.S. chemical industry is faring better this year than last. This recovery is bolstering demand for contract engineers.
"The market [for contract engineers] in the U.S. is certainly expanding, but this is relative to the economic downturn of 2009. The recession hit the whole recruitment industry hard, so the baseline from then was pretty rough," says Tim McAward, a vice president at Kelly Engineering Resources, Troy, Mich., a firm that places engineers into contract and permanent positions. "I'd say demand for contract engineers is now about the same as in 2008, which was a very good year in terms of staffing. 2009 was a disaster and it was good to turn over the calendar on that." Much of the demand centers on three-to-four month contracts that often focus on feasibility studies, he adds.
"In 2010 we've seen solid growth from our customers for contract staffing. The market is still soft for full-time engineering work. Engineering companies need talent and resources but are very skittish about an upturn."
The good news for contract engineers working in chemical processing is that the job situation is holding up. "Jobs are pretty secure in the chemical industry, from basic chemicals to other sectors. We are so heavily dependent on oil in the U.S. that this will continue to be a crucial sector well into the future."
Wages are holding up now, too, McAward says, with a mean of $43.22/hr for chemical engineers working as contract engineers. However, this mean masks quite a sizeable range: from the mid-$20s to the low $70s per hour.
"There was a period of time where some chemical sectors did go after rates, but most of the focus has been on supplemental benefits such as retirement and health care. However, as the economy expands, the employers will have to quickly turn these benefits back on because the availability of talent is very tight."
Another important sector for contract chemical engineers is pharmaceuticals. This market, he says, isn't growing as robustly as it has in the past. "It's okay but there are some major challenges with product recalls."
An added challenge is the ongoing rationalization of the pharmaceutical industry. He cites as a typical example the acquisition by Abbott Laboratories, Abbott Park, Ill., of Belgium's Solvay Pharmaceuticals in February, which resulted in a planned cutback of 3,000 jobs.
"This could prove very helpful for us in terms of contract engineering expertise coming onto the market. But people are still very reluctant to up and move [to new locations]," he adds.
McAward speaks positively about two other sectors that are major employers of contract chemical engineers: "In terms of food and beverages, these industries are a good place to be as most of them have kept up performance during the recession."
One sector to watch is nuclear, which is undergoing a revival in the United States. Policy changes by the federal government are helping to pave the way for significant growth in nuclear capacity, says the World Nuclear Association (WNA), London. "Following a 30-year period in which few new reactors were built, it is expected that four-to-six new units may come on line by 2018… After 20 years of steady decline, government R&D funding for nuclear energy is being revived with the objective of rebuilding U.S. leadership in nuclear technology," notes the WNA.
"I expect nuclear to take off and there are a number of plans on the drawing board. But it is a very long-term legislative process here," says McAward.
Stalled plans for projects afflict most sectors of industry. "Anecdotally, a large number of projects are stuck. Most firms across the board have been really scared of spending capital budgets, although they have big ideas. However, there will come a time when they will have to make big investments in operational efficiencies and install lean operations and so on. When this happens depends on what people believe the state of the economy is. My belief is that the projects will remain stuck until people have the confidence to spend again," says McAward.
The vast majority of contract engineers in the U.S. are lured by the growing economies of the Middle East and Asia, notes McAward. "Only a limited number of contract engineers go there. Over the last seven or eight years, there's been a real strong desire to stay local. It's a fundamental change in family values: I really think this is to do with instability in the geopolitical environment."
THE SITUATION IN EUROPE
The three-to-four month contract scenario in the U.S. also applies across the Atlantic, according to Mark Ballard, recruitment manager, Process Division, NES Group, Manchester, U.K.
"Three to four months is common here, too. That's because there have been a lot of feasibility studies carried out in the last 12 months so these have gone out to tender and now there's a lot of competitive bidding and pricing up of contracts going on. Once these get signed off, it moves on to the detailed design stage and we would expect contract duration to increase then. However, what we have also seen over the last 12 months is that although a lot of feasibility studies have been carried out, they have not moved on to the next stage because the money isn't there to carry them on.
"In the U.K., most of the work that feasibility studies have been carried out on concerns revamps and modifications. The few new potential projects rely on American parent companies that haven't sanctioned them yet."
NES has fewer contract chemical engineers on its books now that it did six-to-seven months ago because so many are transferring from chemicals to other sectors, especially nuclear. The U.K. government is commited to building new nuclear capacity and the nuclear industry believes it can get the first new plant on stream by 2017.
However, the nuclear industry does have a problem retaining contract engineering talent, says Ballard. "The nuclear industry is slower than slow: it can take seven years to go from feasibility to construction. Contract engineers tend to find this too slow moving and a little bit boring." So, he adds, "If a position comes up [in the fine or bulk chemicals, food or pharmaceuticals sectors], I will get people back from nuclear who will want to do it. Even if this means sacrificing rolling long-term contracts in nuclear for a series of short-term three-to-four-month feasibility studies often done for E&C [engineering and construction] companies."
Pay rates in the U.K. and Europe are stabilizing after a period of rapid increase in mid-2008. "Rates have dropped but this is after it went stupid about 18 months ago. At that time a contractor with 10+ years experience could get £40 – £45/hr ($63 – $71/hr) working on a pharmaceutical plant in Northwest England, although the figure could vary slightly from industry to industry and location to location. Now the same person is getting £35/hr ($55/hr).The main reason for this is that it is now a buyer's market. End-users are telling the E&C companies that they only have "x" to spend, so this is really squeezing margins, which in turn affects rates for contract engineers."
There are signs this rate is beginning to pick up again and Ballard believes it could reach the high £30s (high $40s) by end of 2010. "A lot of traditional chemicals and pharmaceutical manufacturing is moving to China and India and other locations where contract rates are lower (Figure 1). So I don't think the rate for these sectors will ever return to the highs mentioned earlier," he cautions.
Ballard holds out more hope for the oil and gas sector, which follows a traditional boom-and-bust cycle, and the water industry, which is poised for major investments in new plant and infrastructure across Europe.
Opportunities in the pharmaceutical industry depend on where you are based, he says. "Our database filled almost overnight with contract engineers from Ireland's pharma sector [following a September announcement by Schering-Plough that it's seeking 160 redundancies at its plant in West Cork] but, on the other hand, pharmaceutical commissioning is steady in other EU [European Union] countries, especially Belgium, France, Germany, Switzerland and Holland."
He particularly cites Geel, Belgium, which is becoming a hub for pharmaceutical production and distribution in Europe. Johnson & Johnson, which has already invested hundreds of millions of euros there has just announced that Geel now will be its distribution center for 11 European countries and to J&J affiliates around the world.
"We pick up a lot of work in these EU countries because they don't tend to have the skill sets they need. Overall, I think the future of commissioning is mainly going to be on mainland Europe rather than the U.K."
Interestingly, Ballard has noted an increase in permanent posts needing to be filled — a sign that purse strings are being loosened. "Permanent recruitment froze when the credit crunch hit. However, since April this year it has been getting busier. Not so much with the E&C companies but rather the manufacturers directly — which makes me feel that they are about to start going ahead with some of the proposals. In my experience, a rise in permanent recruitment is usually followed by an expansion or new project build."
Seán Ottewell is Chemical Processing's Editor at Large. You can e-mail him at [email protected].
