Not many sectors of the economy are more important or more volatile than construction. Reams of studies have revealed it is an incredibly diverse industry reliant on commodities from all over the world. The inputs to nonresidential and residential construction number in the thousands, and the consumer demand factors are just as varied. The determinants of construction activity include (but are not limited to) mortgage and overall interest rates, consumer job stability, workforce development, migration patterns, technological advancement, and regional variation. According to analysts at Deloitte, the global construction market was $11.39 trillion in 2024, and by 2030 it will be at $16.11 trillion. Some of the drivers expected include energy development, data centers, transportation infrastructure, regional shifts in housing patterns, manufacturing, and the overall defense industry. The top 100 global construction companies generated sales of $1.978 trillion in 2024—just slightly down from the prior year. Chinese companies dominate the sector as a whole, accounting for 51.2% of global revenue. European companies account for 22%, and U.S.-based companies come in a very distant third with 8.8%.

The insulation industry is essentially caught between other sectors and their motivators. The construction sector is huge and growing but has been facing an unusual level of uncertainty. The good news thus far is that few projects have been cancelled altogether, but the bad news is that many have been delayed until there is some sense of stability. This has been more of a concern with nonresidential activity, as these are the projects most reliant on inputs such as steel and aluminum. Financing is also a significant issue for these big projects.

The long-term outlook is obviously robust, but in the short term there is an unusual combination of challenges manifesting. Tariff distortion is top of the list for obvious reasons, but there are many deeper and more consistent worries. Many of the tariff targets have involved the materials needed by construction: steel, aluminum, copper, lumber, cement, and others. The on-again/off-again nature of these tariffs has been stalling many construction efforts, as nobody knows with any certainty what a given project will ultimately cost. Each imposition of a tariff on these commodities has been followed by exemptions and carve-outs. The copper tariff imposed by the United States on Brazil had virtually nothing to do with economics, or even protecting U.S. industry. It was motivated by Brazilian politics. The trial of former Brazilian President Jair Bolsonaro offends U.S. President Trump, as Bolsonaro has been an ally. The tariff is designed to force current Brazilian President “Lula” da Silva to back off.

Beyond the tariff and trade wars, there are three long-standing industry concerns or challenges. The first is workforce. The sector is going through some extreme transitions when it comes to workforce. At the top of the scale are the highly skilled workers, whose skill level is advancing fast as technological innovation demands a workforce that is comfortable with traditional activity as well as high tech (artificial intelligence, robotics, and the like). At the other end of the spectrum are the unskilled workers who are pivotal in most construction activities. The supply of these workers is affected by immigration policies. Overall, the U.S., European, and Japanese populations are aging. By 2030, every Baby Boomer in the United States will have reached retirement age—all 72 million of them. Where do the replacements come from?

A second major issue is financing projects. Interest rates have risen for nonresidential as well as residential projects. Banks are far more cautious than has been the case since the end of the pandemic recession. Every government in the world has been running all-time-high levels as far as their debt and deficit are concerned, but that has not stopped any of them from borrowing more and more. Governments borrow through the sale of their bonds, and all this debt has driven the yields up higher and higher. This creates a significant issue as far as debt service is concerned. More importantly for construction, the constant need to sell more government bonds erodes the overall bond market. Bond investors choose the most secure options, and those are the government-issued sovereign bonds. That leaves less money for corporate bonds, municipal bonds, and others. These are often the bonds used to finance large development projects.

A third issue is consumer preference: Where do people want to live, and what do they want to live in? A major migration is underway in the United States as people decide to leave high cost of living states in favor of lower cost and lower tax locales. Populations are leaving western states such as Oregon and California, as well as states in the Northeast. People are moving to the Southeast, Southwest, and Midwest. Baby Boomers drove the market for single-family housing for decades, but now they are seeking smaller homes and are driving the multi-family option. Gen-Z is likewise attracted to that multi-family option. The number of existing homes on the market had been declining over the last few years, but that number is now increasing again, as Baby Boomers elect to sell at a time when mortgage rates are high. The high-growth parts of the United States are in hotter regions of the country, which will mean high demand for energy and energy conservation. Texas is already planning the development of 26 “peaker” plants to meet the demand for power in the summer months. Globally, there is huge demand expected in Europe, as much of the region is just now moving toward widespread air conditioning. Much of the residential housing stock in Europe and the rest of the world uses very primitive and ineffective insulation.

There are also some more positive trends emerging that favor the insulation sector. At the top of that list is the need to be frugal with energy consumption. Global temperatures are rising, and more nations are becoming more dependent on air conditioning (as well as heating). The average home in the United States consumes more than 2,000 kilowatt hours of energy annually for air conditioning alone. The International Energy Agency predicts an additional demand of 1,200 TWh of energy by 2035, and this will require a massive investment in energy production. Everything will be in use—oil, gas, coal, nuclear, wind, solar, etc.—and even with all this development, there will be threats of brownouts and blackouts. A big part of the solution will have to be better insulation in every structure. Some of the new developments in technology will push this need even faster—for example, data centers produce a lot of heat and need a lot of power.

The insulation sector has a diverse supply chain as well. There are dozens of kinds of insulation, with many different design characteristics, and all have their own unique supply chains. The United States imports fiber glass insulation from Vietnam, Mexico, and China, and imports insulation panels from China, the Dominican Republic, and France. It has been reported that more than 340,000 shipments were imported between 2023 and 2024. These imports are not insignificant, but it is estimated that only around 2% of materials are brought into the United States—most of the material is produced domestically. At this juncture, it appears that tariffs and trade barriers are not having a huge impact on insulation, but those barriers and additional costs are definitely affecting overall construction, and that eats into demand for insulation in general.