Aggregate producers anticipating fewer regulations with Trump

By |  May 24, 2017

Results of November’s presidential election gave optimism to many in an aggregate industry that’s already on the rise. President Donald Trump’s administration is promising an easing of regulations on industries such as mining and has suggested spending as much as $1 trillion dollars to boost the nation’s infrastructure.

But while the president’s first actual budget blueprint asked for a large increase in military spending, it called for a reduction in funding to the Department of Transportation. That news, coupled with the realities of Washington politics, have the industry in a wait-and-see mode.

President Trump has nominated Alexander Acosta, dean of Florida International University’s law school, for the labor secretary position. At press time, Acosta’s confirmation was pending. If confirmed, which he is expected to be, Acosta would become the first Hispanic member of President Trump’s Cabinet.

The Senate has already confirmed Elaine Chao as secretary of transportation. She served in President George W. Bush’s administration as secretary of labor from 2001 to 2009. She also served in President George H.W. Bush’s administration as deputy secretary of transportation from 1989 to 1991.

And Scott Pruitt has been tapped to lead the Environmental Protection Agency (EPA).


President Trump signed an executive order requiring federal agencies to cut two existing regulations for each new regulation introduced. The executive order states that prior regulations must be identified for elimination when a new rule is put forward. The order also indicates that costs associated with new regulations cannot increase.

National Stone, Sand & Gravel Association (NSSGA) President and CEO Mike Johnson welcomed this move by the president.

“What this order does is create order in the rulemaking process,” Johnson says. “The proposal to eliminate two rules for each new one will go a long way toward rolling back the regulatory overreach of the last eight years.

“This will be welcome relief for aggregates producers,” he adds. “Easing the regulatory burdens on aggregates operations allows our industry to produce the construction materials needed to improve our infrastructure, economy and communities.”

The president is expected to order the EPA and U.S. Army Corps of Engineers to review and reconsider the Waters of the United States (WOTUS) rule.

The WOTUS rule expanded EPA’s jurisdiction of lands deemed bodies of water under certain definitions and measurements.

According to NSSGA, the executive order would not require EPA to rescind WOTUS. It has been under a nationwide stay from the 6th U.S. Circuit Court of Appeals since 2015, shortly after it was enacted.

NSSGA has been advocating against the rule, saying it poses threats to the aggregate industry, as well as to taxpayers. This could cause increased delays and cost overruns for public works projects, NSSGA says.

“This is a positive step toward ending the threat of this gross overreach of an agency’s jurisdiction,” Johnson adds.

Mine safety

The industry may have months to wait before a new assistant secretary of labor is appointed to lead the Mine Safety & Health Administration (MSHA). On a positive note, the agency reports that mining deaths in the United States reached a new low in 2016.

According to the data, 25 miners died in work-related accidents at the nation’s mines, down from 29 deaths in 2015. This figure represents the lowest number of mining deaths ever recorded and only the second year mining deaths dropped below 30.

Of the 25 fatalities, 16 occurred in metal and nonmetal mines.

For years, NSSGA has touted the importance of the aggregate industry to the U.S. economy, and a report from The Phoenix Center supports the claim. The center released an economic scorecard, “The Economic Impact of the Natural Aggregates Industry: A National, State, and County Analysis,” which details the effect of the aggregate industry on the economy and jobs.

According to the scorecard, quarries are significant contributors to the economic wellbeing of the United States. The industry generates $27 billion in annual sales and employs 100,000 skilled workers earning above-average rates.

In addition, the aggregate industry supports $122 billion in national sales, $32 billion in national earnings, and between 364,000 and 600,000 jobs across a range of occupations and industries. According to the scorecard, each job in the industry supports an additional 4.87 jobs throughout the economy, and each dollar of earnings creates another $4.19 of earnings in other sectors.

Looking ahead

Total transportation construction and related market activity is expected to grow 1.3 percent in 2017, driven largely by increases in highway and bridge private construction activity supporting residential and commercial developments, reports Alison Premo Black, the American Road & Transportation Builders Association’s (ARTBA) chief economist, in ARTBA’s “U.S. Transportation Construction 2017 Market Forecast.”

The market is expected to reach $247.8 billion in 2017, up from $244.5 billion in 2016, according to the report. This includes public and private investment for highways, bridges, public transit, rail, ports, waterways and terminals.

It also includes private investment for roads, streets, driveways and parking lots in residential and commercial developments and support work by state departments of transportation and local governments for highway and bridge planning and design work, routine maintenance and right-of-way purchases.

Although the December 2015 enactment of the Fixing America’s Surface Transportation (FAST) Act provided stability for public highway investment, the increases that will be realized in the federal funding program are just above anticipated growth in inflation and project costs, the report says.

Many state departments of transportation did not obligate their federal funds in time for many projects to get started during the 2016 construction season. In fact, 20 percent of the federal funds available to the states were not obligated until September 2016, according to the report.

Construction starts

Total U.S. construction starts for 2017 will advance 5 percent to $713 billion, says Dodge Data & Analytics in its “2017 Dodge Construction Outlook.” The 5 percent increase will follow an 11 percent gain in 2015 and a 1 percent gain in 2016, the firm reports.

According to Dodge Data & Analytics, a number of factors will contribute to the 5 percent gain in 2017, based on the current pattern of construction. Single-family housing will rise 12 percent in dollars, corresponding to a 9 percent increase in units to 795,000, while multifamily housing will be flat in dollars and down 2 percent in units to 435,000.

In addition, commercial building will increase 6 percent and institutional building will rise 10 percent, while manufacturing plant construction will increase 6 percent; public works construction will improve 6 percent; and electric utilities and gas plants will fall 29 percent.

“On balance, there are a number of positive factors which suggest the construction expansion has room to proceed,” says Robert Murray, chief economist for Dodge Data & Analytics. “The U.S. economy in 2017 is anticipated to see moderate job growth; market fundamentals for commercial real estate should remain generally healthy; and more funding support is coming from state and local bond measures.

Silica sand

Silica sand demand in North America is forecast to expand 5.1 percent per year through 2020 to 82.8 million metric tons, according to a report from The Freedonia Group.

The Freedonia Group report, titled “World Industrial Silica Sand,” offers insights on a number of silica sand trends. The firm reports that the 5.1 percent-per-year growth is somewhat less than that recorded between 2010 and 2015.

Low oil and gas prices into the near term will depress the number of new wells drilled through 2020, limiting opportunities for frac sand suppliers, the firm says.

The Freedonia Group adds that increasing intensity of use per well will fuel robust growth in silica sand consumption, making it the fastest-growing market in North America into the long term.

Vulcan Materials

Tom Hill, chairman and CEO of Vulcan Materials Co., is upbeat about the future.

“We expect aggregates shipments to grow between 5 and 8 percent and average selling prices to increase between 5 percent and 7 percent,” Hill says.

Regarding the company’s earnings outlook for 2017, Hill adds, “The strong fundamentals of our aggregates-focused business and the outstanding improvement in our core profitability have led to strong earnings growth during the last three years of recovery.

“In 2017, we expect continued growth across the vast majority of our markets and across each of the end-use segments we serve.

“Our expectation for full-year adjusted EBITDA of $1.125 to $1.225 billion is driven by a continuing recovery in shipments, with higher levels of publicly funded construction activity just beginning to join the ongoing recovery in private demand, as well as a favorable pricing environment.”

The following assumptions support the company’s outlook for strong year-over-year growth in adjusted EBITDA in 2017.

■ Aggregate shipments growth of 5 to 8 percent from 2016, with growth weighted more toward the second half of the year.

■ Freight-adjusted aggregate price increase of 5 to 7 percent, with unit margins continuing to grow faster than pricing.

Martin Marietta

Ward Nye, chairman, president and CEO of Martin Marietta, says, “Looking ahead, we expect continued and accelerating growth in all three of the company’s primary construction end uses, and our leading market positions will allow us to continue benefitting from these opportunities in 2017 and beyond. We are highly confident that a durable, multi-year construction recovery is now underway, consistent with third-party forecasts.”

Nye says he is encouraged by the emerging bipartisan dialogue in Washington regarding the need for substantial investment in the nation’s infrastructure. “We believe the new administration and Congress should ensure increased, sustainable infrastructure funding commensurate with the nation’s clear, underlying needs.

“We expect infrastructure demand to be meaningfully and positively impacted by the $305 billion FAST Act, as well as multiple state initiatives. Longer term,” Nye continues, “infrastructure spending is expected to benefit from strong state and local support for increased funding, as evidenced by the significant number of state and local transportation funding-related ballot initiatives that have passed over the previous 24 months. Private-sector construction indicators also signal continued growth for both nonresidential and residential activity.”

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