How producers, manufacturers are managing inflation

The following transcripts were edited from two concurrent discussions that took place June 8 at the 2022 Pit & Quarry Roundtable & Conference. The transcript from one session begins here while the transcript from the other starts later on. Both conversations were edited for brevity and clarity.

P&Q: The annual inflation rate reached a 41-year high of 8.5 percent in March, with the impacts of inflation having very real effects on industry businesses? Producers: In what ways is inflation impacting your operations? What has your 2022 experience been like with diesel and fuel pricing? Where are employee salaries and wages this year versus 2021 and the years prior? What other line items are taking a serious hit because of inflation? And how is your company adjusting to effectively navigate the business environment? We’ve seen first-quarter 2022 reports from the industry’s public aggregate producers and heard sentiments from many others who stress the importance of managing their own aggregate prices. What are the challenges you face on this front right now, and what is a producer’s ultimate task at hand right now when it comes to materials price management? For equipment manufacturers, dealers and others: How is inflation taking hold of your company, and how are you reacting to ensure prosperity?

MARK STRADER (BRAMCO-MPS): From the distributor’s point of view, rising costs are everywhere. I don’t really care where you are. I have found that our customer base has been fairly understanding of price adjustments or price increases. They don’t like it, nor do I, nor do the manufacturers. But it is what it is at this point. It’s worked out okay so far.

KEATON TURNER (TURNER MINING GROUP): Most of our contracts are long-term contracts. A lot of them have built-in escalations, typically 3.5 percent tied to a CPI (consumer price index) – something like that. The construction industry is seeing greater inflation than just 8.5 percent. Having a conversation with a client where they’re used to a 3.5 percent annual increase and we’re talking about 15 percent, those aren’t fun conversations for us and our clients. I think us and some of our other service-providing competitors are seeing margin squeeze. All our employees see what inflation’s doing. Whether they feel it or not, they’re asking for pay increases. They’re asking for cost-of-living adjustments. You’ve got to pass it on to the customer in some way. The pace at which you’re able to have those conversations and get price increases approved is much slower, it seems, than the pace at which the costs hit the contractor or the employees,

JOHNNIE GARRISON (SUPERIOR INDUSTRIES): Wages are really important, and our industry welders seem to be really hard to find these days. It’s not uncommon for us to make wage increases to try to retain employees and then, a few months later, they can go down the road for $2 more an hour. People used to remain loyal to a company for 30 years, and now there’s a lot of people you can’t keep around. So wages have been a challenge, and we’re trying to stay ahead of that. Planning ahead is almost impossible. It’s really hard to project when you’re getting hit every week with something different. Increasing pricing and passing that along at the rate that it increases, for us, is not even possible.

BRIAN VRABLIC (RULMECA CORPORATION): Our strategy tends to be what I call fast, firm and fair price increases. We have to be out in front of the market as best we can, and we have to be firm with those price increases. We also have to be transparent and communicate those increases as best we can. Sometimes you can’t. Sometimes, I feel like I’m managing our margins and our fixed costs every month. It’s a real challenge. If the pricing pressure comes and quickly falls off, of course the consumer is going to say: ‘I’m not paying for that.’

TURNER: When you start talking about price increases, we hear a lot of: ‘Well, inflation is not here to stay forever, and it’s not going to stay at this level.’ The tough part is when you give employees pay increases and inflation does go the other way or starts to cool off, you’re not going to adjust employee pay back down. It’s really difficult to do because they’ll go across the street to people that haven’t adjusted it back down. Having those conversations and trying to forecast what inflation or cost of living is going to do, it’s a little easier on equipment, I think, than it is to just adjust our employees’ pay up and down and cost of living up and down. That’s a much hairier game for us.

KAREN HUBACZ (BOND CONSTRUCTION CORP.): I think less is more at this point. I think the demand is so high that we’re able to pick and choose more who we’re selling our products to. I anticipated a lot more pushback with the increases we’ve had, and there has been almost none because, I think, everybody realizes where we are at. Everybody goes and puts gas in their car. They understand. Milk has gone up, everything’s gone up. I think all of us are feeling that pinch. So far, nobody’s pushed back that much with the increases. Not in our area anyways.

VINNIE ROCCO (AMCAST): Surcharges have been a big challenge for us. The invasion of Ukraine, for us, is a big challenge in fuel surcharges. Our furnaces use natural gas, and most of that comes from Russia. That was something big to deal with right off the bat. In the beginning, we didn’t have too many issues with raw materials surcharges, but that’s kind of creeping in now, too. So maybe [it’s] not exactly inflation, but it is a type of price increase that we’re having to manage as best as possible. We’re trying to keep the pricing relative to what it was before this mess happened. We’re trying to offset that with our own surcharges so we can quickly drop them because the fuel surcharges and raw material surcharges are pretty variable and fluctuate quite a bit from month to month, and we adjust those up or down.

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