2016 P&Q Roundtable & Conference: Part 2

The Pit & Quarry Roundtable & Conference in Coral Springs, Fla., united aggregate producers, manufacturers and allied trade representatives in an idea-exchanging forum. It marked the 20th anniversary of Pit & Quarry’s first roundtable. Sponsored by Am Cast, Philippi-Hagenbuch, Sandvik Mining & Construction, Superior Industries and Terex Minerals Processing Systems, the event drew more than 40 people to the Fort Lauderdale Marriott Coral Springs, where discussions took place in two roundtable formats on the economy, employment, mine safety and other topics.

Following are edited and abbreviated transcripts from the second of two roundtable sessions. Part 1 appeared in the April issue.

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Moderator: Kevin Yanik, Pit & Quarry
Scott Alexander, ACG Materials
Dana Boyd, North American Limestone
Brandell Campbell, Cemex
Trent Carney, Rogers Group
Phil Eisel, Cardinal Aggregate
Kelly Graves, Kleemann/Wirtgen Group
Zach Green, Barrett Paving
Dave Jones, Mid Coast Aggregates
Scott Lanker, Bedrock Resources
Rick Madara, McLanahan Corp.
Alan Maio, Q4 Impact
Michael O’Berry, Vulcan Materials
George Reddin, FMI
Matt Sitter, Fla. Concrete & Products Assn.
Vinnie Rocco, Am Cast Inc.
Lori Sanville, Vulcan Materials
Mike Schultz, Superior Industries
Josh Swank, Philippi-Hagenbuch Inc.
Chris Upp, Conco Quarries

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YANIK: U.S. aggregates consumption continues to make solid gains as shipments catch up with the surge in construction contracts, says industry analyst David Chereb, who expects high demand to continue for the next 12 to 18 months. That said, we want to ask the producers: How do your sales expectations for 2016 compare with recent years?

GREEN: Sales expectations for us kind of vary by state. In New York, we expect sales to be somewhat flat. With the federal bill (FAST Act) passed, it is going to give some states some funding to go forward. But the states still need to do something for their own funds.

Something we see in Pennsylvania: They passed an act called a state funding mechanism for transportation. They have a robust budget along with the secured federal budget. We see their continued growth compared to previous years, so it is going to be good in Pennsylvania.

UPP: 2015 was a nice surprise for us. Our third and fourth quarters helped boost us up for 2016. We are looking at kind of a flat year with a lot of our highway funding in Missouri. Although the federal highway bill is great for long-term stability, Missouri is still way behind on funding.

In Missouri, we had two different proposals to go to the legislature and both failed. We are basically at a point now where we are getting close to not being able to match federal funds at the state level.

ALEXANDER: Our operations are mostly west of the Mississippi [River], and we are in many diverse markets. A reasonable percentage of our business is in the energy sector, oil and gas. That is significantly way off.

That is being countered by what is happening with infrastructure spending. Some of our mineral processing, especially products, are really up. 2015 was a good year for specialty products for us, as 2016 will be. We are cautiously optimistic.

If the energy sector comes back, it will be a fantastic year. But we don’t expect that in 2016. That most likely will be 2017. Our operations overall – even being stimulated with the highway bill – will probably be flat. But that is not bad because overall our business is doing quite well.

MADARA: 2015 was a record year for us. I think those numbers were skewed a little bit. Most of that is in the silica sand/industrial sands. Moving into 2016, we saw the aggregate industry kind of take over what the mineral industry didn’t produce for us. We plan to have another record year in ‘16. North America looks promising.

SCHULTZ: Our outlook for 2016 mirrors McLanahan’s. We’re coming off a very good year. We think we will have growth in ‘16. A lot of that will be attributed to new product development that we have in the process right now. We are really looking at 2017 as a big growth year for us. We kind of feel like producers have been in more of a repair mode versus a buying mode. We are hoping the influx of highway funds will spark buying growth in 2017.

JONES: We own quarries in Florida, which has been pretty robust over the last few years. We see ‘16 to be even more positive. The overall Florida [Department of Transportation] budget is a billion dollars. Half of that goes into roads and bridges in central Florida. So we see a pretty strong next couple of years depending on how things go in that region, particularly between Orlando and Tampa.

EISEL: We have been fairly active the last few years. We also do offsite crushing, and we chase the markets that are busy. In our area, we see the Michigan market as the next taking-off area. Michigan has been pretty depressed the last few years, so we see that’s a pretty good market in the future.

UPP: One area we’ve been paying attention to is contract recycling. We are a supplier. We are starting to see every excavation contractor around knowing where to get and rent a portable recycling plant. They are taking in demolition work. We see this as a competitive factor that we hadn’t seen in the past.

ROCCO: We see a lot of companies pop up and then kind of disappear within a month. Sometimes, they will go and make an investment on the machine and still disappear, because they don’t realize how much policy is involved and how many permits are involved.

YANIK: Switching gears: More than half of the current workforce in the U.S. mining industry will be retired by 2029, according to the Society for Mining, Metallurgy & Exploration. This will create a projected shortfall of more than 220,000 workers. How concerned are you about the aggregate industry’s ability to replace workers as they retire?

LANKER: Some of the more specialty and skilled positions have been really difficult to fill in our market. It is nearly impossible to find a qualified heavy equipment mechanic who wants to work full time with a salary.

Similarly, we operate walking draglines, and dragline operators are very difficult to find. Most of the ones you find are within a couple years of retirement. They may or may not be interested in working full time.

And so I think some of those more specialty positions, contrasted with basic equipment operators, have been very difficult to find – especially younger, straight-out-of-college people who are interested in doing that as a career.

SITTER: It is slim pickings finding good people. We all have a duty to bring awareness to some of the younger folks entering the career stage. A lot of them don’t know the opportunities that are there for them if they choose to go into this industry.

A lot of times we are interviewing the same people for similar jobs. I think what we resort to is finding the best people we can and implementing internal training programs. That is all you can really do.

ROCCO: It is definitely a difficult thing to find qualified people. It is harder with more and more technology out there. People want to make quick money. They want to go right out of college for a quick-paying job. They don’t even look at this industry.

O’BERRY: My focus is on environmental permit and regulatory matters, and we are not seeing a lot of people with industry experience. Also, people don’t have the right attitude and demeanor to fill jobs. [For example], we went through a hiring process last year, interviewed a lot of people, screened a lot more people, and it ended up where I went out and hand picked somebody – not from a competitor, of course.

We expect certain things out of people. We expect them to be energetic, well-qualified, self-starters and the like. And, sad to say, a lot of applicants just don’t fit the bill.

MAIO: On the skilled labor side, I agree with all the comments that I have heard. From a salary perspective, I think one of the issues in this industry is that we don’t promote the industry very well, if at all. We don’t know how to attract young people into the industry, and we have no idea how to manage a multi-generational workforce. We think, ‘Well, we have been doing it like this, so this is the way it is done.’ Or, ‘These millennials need to adjust.’ That is the wrong way to look at it from my perspective.

Our industry needs to start adjusting to what the millennials’ expectations are out of a job, a career, a company. It is a different way of looking at things, but it is not going to change. Millennials have a very different way of what they expect.

If the aggregate industry wants to attract the top talent and really make a difference, we really need to adjust. We are stuck in 1965.

CAMPBELL: Going through the hiring process, we found we do have to look at our staff. We have to look for that link. Everybody in that room is linking from the old way and the new way. We have to find ways to bridge that gap, and social media is a good method.

I have a couple of kids in college doing computer engineering, computer science. There is a place for that in the aggregate division and in the business world that we do. However, we have to make a little more commitment and focus on bringing those guys who are going to start off on a shovel or water hose and start home growing your operator’s process.

CARNEY: I work a lot with Boy Scouts of America. With the recent addition in the Mining in Society merit badge, we are getting a lot of calls from different scouting troops. They want to complete this merit. So we found it is a great opportunity to work with these boys who are basically 11 to 17 to get them out to the quarries and let them learn about mining.

When they come up, they see a diversity of equipment. As part of the merit badge, we discuss careers. When you teach the merit badge at our location, we talk about those careers. It’s amazing to see these younger kids can open their eyes to a lot of potential that they never even knew was out there.

YANIK: Let’s move on to safety. What are your feelings about the relationship today between the Mine Safety & Health Administration (MSHA) and the aggregates industry? Has the relationship improved under [Assistant Secretary of Labor] Joe Main? Have some strides been made?

BOYD: Coming into play now are coal mine inspections, which overreach. But a bigger issue than that is we have a major influx of these other inspectors governing. Coal has not always had a good communication program at MSHA.

We get two inspections a year. This last year, service operations had six in place. My goodness. They are looking for something to do – paperwork, things to that effect.

ALEXANDER: I would like to see that there have been changes, but I haven’t seen any. The industry has really put safety at the top of the list. We have invested a lot of money in audits. We are doing a lot of auditing and self-policing where it is much better, but we haven’t seen any change in the number of citations. If anything, they have gone up.

You get a citation for not having a lid on a trash can to not having a porta-potty in the certain areas of the pit to make them accessible for employees. I have never seen that.

JONES: I think everybody would agree that any inspector, good or bad, could go into any operation and probably find something legitimate. How you react to what he finds is basically how, in my experience, they end up treating you going forward. So, if the next time they find the same thing and it is the same guy, you are obviously going to see the wrath.

BOYD: If you own a business, you have to do it right. One citation is unacceptable – period. I don’t care what it is.

From the small business side of it, my industry modification of insurance collates with that comp rate to the penny and has to be accounted for, so I have to look at that side of it. I am very picky with inspectors. [After] several years of major restoration, I know a little bit about the inspector coming in and not [being] trained to the level that some of the others have been.

If you look at the law, it is black and white. People go back to saying there is some gray there. Well, the lid is not on the trash can. I am sorry. There is a tag on there that says any food or drink be placed in this. Therefore, you cannot cite me for that.

I had one inspector on my site for days. He went through everything you can imagine. Long story short, he said, “I have to find something.” I said, “What do you mean?”

UPP: All too often you have good operations. You can. Everybody knows what the rules are. They have been in place since 1977. There is nothing new. It is all interpretation by the inspector. So whenever you get an inspector who says, “You know, I have to find something,” it is because he knows someone is going to look and say, “Come on, this is a big operation. You couldn’t find one thing? Let me get one of these guys from the district office to follow up and see what you missed.”

Then you get a target inspection. They come in. I want to have zero citations, too. But if they write one that is a $110 citation that is not going to impact to the point where I am better off over the long term of having that one goofy citation and taking it and paying it, writing the check, as opposed to having two perfect inspections – and then the next inspection there are five inspectors who show up at my site in two weeks, and they write 32 citations that are going to cost me a couple hundred thousand dollars, [I’ll take that.]

I think Joe Main has been a lot more open and willing to listen to the concerns of our industry and try to separate some of the safety issues that we have to deal with as an industry versus [other] mining sectors. I think he has started to recognize that we do have different things that we have to deal with. I think NSSGA’s (National Stone, Sand & Gravel Association) alliance has done a lot to help the industry.

YANIK: All right, on to industry trade shows. A number of shows, both domestic and international, will take place through next March, including Hillhead, MINExpo and ConExpo-Con/Agg. Manufacturers, do you plan to exhibit at these shows, and will you continue to spend annually to bring equipment to such events?

MADARA: We certainly plan to attend all of those, and we will exhibit. Depending on new products we want to launch, we will take equipment to those types of shows. On the flip side, I think it is always important to support local trade shows. We try to attend as many of them as we can.

SWANK: We plan on being at all the major shows. We exhibit domestically and we have a presence at the international shows. We typically don’t take equipment based on the customized nature of what we do. We enter a show planning to be there for the long term. We are there to see the clients and to support them when they have questions.

GRAVES: We will participate in all the trade shows throughout the world. We will also participate in smaller [shows]. We do plan to have equipment at the larger shows. I think there is something to be said for being there and being seen. It certainly is a better alternative than not being there or not being seen because then questions arise. But we think it is very important to our business, as well as seeing customers.

ROCCO: For us, we may or may not sell a piece of equipment or parts, but that is not what it is about. It is an opportunity to bring some of our sales guys from across the country and put them in front of people. They may have only dealt with someone on the phone. So in that aspect, it is nice.

YANIK: Moving on to NSSGA: Passage of a multi-year federal surface transportation bill was the primary focus of the association in recent years. With a long-term bill passed, what should NSSGA’S next priorities be?

LANKER: It seems nobody really seems to know [about] some of these ridiculous regulations that the EPA (U.S. Environmental Protection Agency) is trying to force, for whatever reason. I know NSSGA has been actively fighting those, which we all appreciate.

ALEXANDER: Lobbying is kind of their thing, helping out with environmental issues and with MSHA. Also, we can’t lose sight of the fact that the highway bill just got approved. How long did it take to get that? It is almost an ongoing process. We need to lobby for that and maybe help the state association get a gas tax or a funding mechanism for more roadwork. It all goes back to lobbying.

GREEN: I think if they continue the efforts on the local level it would help to increase the efforts at the state level where they can work with state associations to get state funding mechanisms in place. I think that is really the long-term solution to start taking care of themselves and to stop relying on the federal government to provide funding.

YANIK: One last topic: new equipment and technology. Equipment and technology have accelerated in recent years, and we hear of new and innovative products being used. What have you observed from an equipment and technology standpoint that has impressed you and/or advanced aggregate operations?

SANVILLE: We have USGS (U.S. Geological Survey) available on iPads. That has helped us in the field on both the technical side and with actual end users in the field ensuring that we don’t have mistakes that were at one time a little more common with regard to over-mining or not being exactly where you thought you were going to be on an area rectified. That has been a great thing for us.

SWANK: Some technology we see that’s really exciting is the free-standing technology being taken out to the client’s facility, doing a scan to see how increasing equipment will interact with that existing equipment – not just spec equipment on the shelf that has never been used that you have through your operation.

Also, the rapid prototype technology: being able to come up with an idea, put it into CAD (computer-aided design), and spit out a design in a couple of days. This allows the client and engineer to be intimate. You see what they are going to be getting and how it is going to interact with their facility.

SCHULTZ: From the equipment side, advanced monitoring is helping producers run their plants more efficiently. We put a lot of focus on this.

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Pit & Quarry Roundtable & Conference participants weigh in on the state of the aggregates industry, new technologies, sales growth strategies and more in exclusive videos from the 2016 event in Coral Springs, Fla. Visit www.youtube.com/pqtv3, and click on our playlist featuring videos from the 2016 Pit & Quarry Roundtable & Conference.