Pit and Quarry

Aggregates demand to increase sharply after 2013

The drop in aggregates consumption during the past five years has been unusually large owing to the recession (of course) and the sharp decline in aggregates intensity. Aggregates intensity has dropped by more than 37 percent since 2006. No doubt the high intensity level of 2006 was unsustainable, but the low level we have today is also unsustainable.

(Note: We are using Aggregates/Employment as a measure of intensity. Aggregates/Employment equals aggregates volume divided by the level of U.S. employment. For example, in 2008, U.S. aggregates consumption was 2.4 billion metric tons and total U.S. employment was 145.2 million workers. The ratio is 16.5 and is shown as aggregates intensity; the amount of aggregates used per employee.)

The low aggregates intensity level in 2012 is one reason we are near a bottom in aggregates demand. The low volumes for 2012-2013 in our forecast are due to the continuation of low intensity values. The slowdown in nonbuilding work, which has a higher aggregates intensity ratio, is the main reason for the low current levels. Since we think nonbuilding will be a lagging segment for construction activity for the next two years, aggregates demand remains in a holding pattern.

When state and local budgets regain their balance as the economy recovers, the intensity ratio will once again move up. By 2016, the intensity level will recover to near its 2008 level. This means aggregates demand will increase strongly after 2013 as aggregates plays catch-up to higher economic output. -David Chereb

Rise of 'rock and roll'

We first reported in January on The Freedonia Group’s World Construction Aggregates study. The group concluded that the global market for construction aggregates is expected to rise an average of 5.2 percent per year through 2015 and, more specifically, the North American market is expected to increase 4.3 percent per year. This is good news compared to the average annual decline of the North American market by 1.7 percent per year from 2005 to 2010.

And owing to more restrictive land use and environmental regulations, as well as the depletion of natural aggregates reserves, sales of recycled, secondary and other aggregates will climb at an above-average pace during the 2010 to 2015 period.

So “rock” is on the rise. What about the “roll”? Well, The Freedonia Group also did a study on the global demand for mining equipment, including “nonmetallic minerals mining machinery.” In World Mining Machinery, the group projected that the world market will increase an average of 8.5 percent annually through 2015.

This is consistent with what I have heard from some of the larger equipment manufacturing companies. However, much of the growth they’ve been experiencing and projecting for the near future is based on sales in other parts of the world, especially Asia.

In this latest study, The Freedonia Group says the North American market for mining equipment will also rise – an average of 5.8 percent per year.

While the projection is that the market for nonmetallic minerals mining machinery will increase at a somewhat slower rate than that of metal- and coal-mining equipment, the good news is that it’s going up.

Coupled with some upbeat news on the construction front, these two latest studies from The Freedonia Group give us much reason for optimism. It’s music to our ears. -Darren Constantino

Brighter days ahead?

And now for some good news.

Construction contractors and equipment distributors are optimistic local non-residential activity will improve in 2012, according to a recent survey by Wells Fargo Equipment Finance Inc., part of Wells Fargo & Co. In the company’s 2012 Construction Industry Forecast, Wells Fargo’s Construction Optimism Quotient (OQ) – the survey’s primary benchmark for measuring contractor and equipment distributor sentiment – is at 114 for 2012, marking a material increase from 96 in 2011. An OQ over 100 is considered optimistic of year-over-year improvement in local non-residential construction activity.

Highlights of the 2012 Construction Industry Forecast

• The worst is behind us. The OQ of 114 is a strong indicator that the industry expects 2012 non-residential construction activity to improve from last year. The 2012 OQ exceeds the score of 109 recorded in 2005, near the height of the construction boom. After falling to an all-time low score of 42 in 2009, the OQ climbed to 66 in 2010 and 96 in 2011.

• Overall numbers of contractors remain a concern. In spite of rising optimism over the last three years and strong optimism for 2012, industry executives remain cautious about the amount of available work to sustain the current number of non-residential construction contractors. About four in 10 respondents (41.7 percent) said they expect fewer contractors in their markets by the end of the year. Only 10.4 percent expect the number of contractors in their area to increase in 2012.

• Equipment distributors are very optimistic. When asked about their forecast for new equipment sales, 73.3 percent said they expect to sell more in 2012 than in 2011, and zero respondents said they expect a decrease in new equipment sales. Optimism among construction equipment distributors was high with nearly six in 10 distributors (58.1 percent) expecting an increase in local non-residential construction activity. Only 1.5 percent said they expect that activity to decrease in 2012.

• Contractors are optimistic, but not as much. While 18.3 percent of contractors said they expect to acquire more new equipment in 2012 than they acquired in 2011, 52.5 percent said they would acquire the same amount and 29.2 percent said they expect to buy less new equipment in the coming year. About 40 percent of contractors said they expect non-residential construction activity to increase in the coming year; 47.3 percent expect the same level; and 12.4 percent said they expect non-residential activity levels to decrease.

Road to recovery

Based on sustained expenditures on road construction in the U.S., world building materials producer HeidelbergCement said it is expecting “slight growth” for aggregates and cement in North America this year.

“For both core products, price increases are targeted in order to offset margin erosion in 2010, rising input costs and capital expenditures for meeting [emissions standards],” the company said in its overview of the fourth quarter and full year 2010. “The extent and speed of the U.S. recovery still depend on spending behavior in the states. A reduction of the unemployment figures remains a crucial factor for an upturn in private residential construction in the U.S. In Canada, demand from the resource driven industry in Alberta, Saskatchewan and Manitoba is expected to continue to generate demand for building materials.”

HeidelbergCement said overall economic development in 2010 was better than expected. Financial figures increased in 2010 compared to the prior year. This reflected continued growth in the company’s emerging markets and the start of recovery of mature markets in North America and Europe after having reached the bottom of the crisis in 2010. Turnover and operating income in the mature markets of North America continued to improve in the fourth quarter 2010 compared to the prior year, mainly driven by infrastructure spending and due to the company’s cost-saving measures.

The company’s aggregate sales volumes in North America increased 4.3 percent in the fourth quarter, compared to the prior-year quarter, while aggregate sales rose 2.9 percent for the full year compared to 2009. – Brian Richesson
 

The top 100

Do any of these infrastructure projects look familiar?

Perhaps your company contributed to one of the projects that CG/LA Infrastructure LLC listed in its Top 100 Infrastructure Projects in North America. Take a look here.

According to the Washington, D.C.-based consulting firm involved in infrastructure project identification and development, the total estimated value of these projects is nearly $465 billion, with a potential to create nearly 7 million full-time employment positions over the coming five years. Projects are focused on the long-term competitiveness of North America and were identified through a participatory process with industry professionals.

Projects included in the Top 100 list cover 10 distinct, strategic infrastructure sectors: airports ($28 billion), digital ($21 billion), electricity ($78 billion), high speed rail ($60 billion), oil and gas ($13 billion), ports and logistics ($3 billion), renewable energy ($19 billion), surface transportation ($50 billion), urban mass transit ($132 billion) and water and wastewater ($5 billion).

Projects were selected and scored based on the following criteria: contribution to local economic productivity, contribution to global competitiveness, reliable projections as to opportunity and jobs creation, business opportunity creation over the next three to 18 months and energy productivity. – Brian Richesson