Aggregate producers expect more growth to come

As the aggregate industry prepares to turn the page to 2020, producers, equipment suppliers, dealers and others aren’t necessarily oozing with optimism.

They do, however, remain somewhat optimistic – cautiously optimistic, that is – about the 12 months to come.

The economy is generally healthy and demand for construction materials is steady, but little wrinkles are surfacing that are beginning to cloud the outlooks of industry stakeholders. Some examples:

• “Tax dollars in California that are earmarked for roads from the gas tax are now being diverted to other types of transportation improvement and extension such as rail,” says Sean McElwee, senior account manager at Cemex.
• “Several large projects will be wrapping up this year, and I’m not sure the growth we’ve seen is sustainable,” says Stewart Petrovits, vice president at Route 82 Sand & Gravel.
• “I feel there is an [aggregate] shortage, but because of regulations it’s harder to install new plants,” says Charles Romero, general manager of Excel Machinery.

These were some of the sentiments producers and others shared with Pit & Quarry through our annual survey, distributed ahead of this month’s State of the Industry Report.

Taking in the totality of this year’s responses, it’s clear producers and their vendors feel growth is still on the horizon. The outlook for the industry could take an unfortunate turn, though, if the long-overdue recession arrives or another significant event unfolds in the new year.

“If a Democrat is elected president, I expect a major contraction of the economy for a prolonged period,” Petrovits says.

Aggregate sales & pricing

Fortunately, the economy churned out more sales and pricing growth in the past year.

In fact, more producers reported aggregate sales increases of 10 percent or more this year (31 percent) compared with those who did so in 2018 (12 percent). Sales were up 5 to 10 percent for another 31 percent of producers in 2019, while 10 percent of producers report that their sales were up less than 5 percent.

These were all positive 2019 developments for producers, few of whom say aggregate sales flatlined. Yet another positive development: No producer who took P&Q’s State of the Industry survey indicated sales were down this year.

Similarly, 2019 aggregate pricing developments provide another reason to smile. The majority of producers (53 percent) tell P&Q their pricing was up less than 5 percent, but one in four say pricing was up between 5 and 10 percent this year.

Like aggregate sales, not a single producer indicated their aggregate pricing took a dip in 2019. Eighteen percent of producers did, however, indicate their pricing was flat compared to 2018.

Most producers expect their 2020 aggregate prices to be on the up, as well.

While 35 percent expect pricing to flatten out in the new year, 29 percent expect pricing to be up less than 5 percent. Nearly one in four producers, meanwhile, feels prices will go up 5 to 10 percent in 2020.

Additionally, most producers expect their aggregate sales to continue on an upward trajectory along with their pricing. Sixty-five percent of producers expect their aggregate sales to increase in the new year. Specifically, 35 percent anticipate their sales to be up between 5 and 10 percent while one in four expect sales to be up less than 5 percent.

Nearly one-quarter of producers anticipate flat sales, and a handful (12 percent) expect their aggregate sales to be slightly down.

Overall, the outlook for 2020 aggregate sales and pricing is largely positive. Producers cite a number of factors for their optimism, including continued demand for infrastructure; the economy and political climate; current demand and bidding opportunities; and state projects in backlog.

“If the infrastructure bill gets passed, everyone better hang on,” says Van Furgeson, quarry superintendent at Buzzi Unicem. “It will be a ride we have not seen for a long time. Everyone will be sold out, from aggregates to equipment.”

Capital spending

Aggregate sales and pricing weren’t the only business areas that were up in 2019. Producers tell P&Q their capital spending was up over the prior year, as well.

In fact, 75 percent of the producers P&Q surveyed report increasing their capital spend at least somewhat. Thirty-eight percent spent 5 to 10 percent more on equipment and services in 2019, and one in four says their spend was up less than 5 percent.

Only a handful of producers (13 percent) indicated their spend was actually down compared to 2018.

More than half (53 percent) made a significant investment in an excavator or loader, and nearly half invested significantly in conveying and material handling equipment (47 percent) and crushing and hydraulic breaking equipment (47 percent).

In addition, 27 percent of producers made a significant 2019 investment in a haul truck, while 20 percent respectively made a significant purchase in scales and weighing equipment and screening equipment.