Mentions of “reshoring,” “nearshoring,” and “onshoring” have surged by an impressive 216% year-over-year since the beginning of 2022, according to data from Bloomberg. This trend, which refers to the relocation of manufacturing back to home countries, has attracted a staggering $516 billion in private company investments since President Joe Biden took office.

What’s driving this shift? The re-shoring wave, which started during the Trump era, has gained momentum due to trade wars and the challenges of the COVID-19 pandemic. The pandemic exposed the vulnerabilities of global supply chains, highlighting issues like port backlogs, blockages in crucial canals, and rising automation and freight costs. As a result, re-shoring has become a more cost-effective option for many companies.

Some companies are already reaping the benefits of this shift. Sterling Infrastructure, for example, has seen its market value skyrocket by 506% in the last four years. Other firms, including Quanta Services, TopBuild Corp., Emcor Group Inc., and Fluor Corp., have also experienced substantial rallies in their market performance.

The need for construction related to nearshoring is widespread across various sectors, ranging from life sciences and hospitals to technology. The growing demand for data centers, driven by advancements in artificial intelligence, has led to sales growth between 20% to 30% in recent years.

Furthermore, international companies like Hyundai Motor Co. and Rivian Automotive Inc. are also contributing to the resurgence of U.S.-based manufacturing. In fact, construction and manufacturing expenditure reached $198 billion on an annualized basis in August, marking a remarkable 66% surge from the previous year.

So, why does this matter? The growth of reshoring is propelled by market forces, government stimulus packages, and incentives for local manufacturing of important items such as semiconductors and electric vehicles. Additionally, strained U.S.-China relations have added to the appeal of nearshoring. The recent rebound in U.S. manufacturing activity, with the ISM Manufacturing PMI reaching a 10-month peak in September 2023, indicates that the sector is recovering from a prolonged slump. This resurgence in manufacturing aligns with the current trend of reshoring and is likely to further fuel the ongoing construction boom.

Frequently Asked Questions

What is reshoring?
Reshoring refers to the process of relocating manufacturing activities back to the home country from foreign locations. This is often done to reduce costs, improve supply chain stability, and take advantage of market forces and government incentives.

What is nearshoring?
Nearshoring involves moving manufacturing operations to nearby countries, typically neighboring countries or those within close proximity. This strategy is often adopted to maintain shorter supply chains, reduce transportation costs, and improve communication and collaboration.

What is onshoring?
Onshoring refers to the practice of relocating manufacturing activities to the home country, with a focus on creating jobs and boosting local economies. It involves bringing back manufacturing operations that were previously outsourced to foreign countries.

Sources:
– Bloomberg: https://www.bloomberg.com
– Benzinga: https://www.benzinga.com