Plenty to celebrate as 2021 nears an end

Yanik

A year ago around this time, all of us were looking forward to turning the page on 2020 and welcoming 2021 into our lives.

While 2021 has been no cakewalk, there is a lot to celebrate in terms of how the year played out for the aggregate industry. Yes, some key issues will carry into 2022, but aggregate producers should largely feel good about the state of their industry as yet another year nears its end.

Some good upfront

1. Aggregate production steadily continues. Although the U.S. Geological Survey (USGS) is still months away from publishing complete 2021 aggregate production totals, production is trending in an upward direction.

USGS’s first-half figures, coupled with reports through the third quarter from the industry’s publicly traded producers, support the notion that 2021 aggregate production figures will exceed 2020’s. Plus, the general narrative making its way across the industry is that producers kept busy this year despite ongoing challenges in the supply chain and shortages in the labor market.

2. Aggregate pricing improves further. Producers were not only able to put a steady stream of material volumes into the market in 2021, but they made good gains in aggregate pricing. The pricing improvements were especially critical for producers as they endure elevated costs across their businesses, spanning everything from equipment and parts to labor and fuel.

Vulcan Materials chairman and CEO Tom Hill, for example, in November characterized the operating environment as a “challenging” one caused by inflationary pressures and labor constraints. Yet, aggregate pricing at Vulcan continues to move higher.

Fernando González, CEO of Cemex, had a similar view as Hill as his company emerged from the third quarter.

“We are pleased to report strong top-line growth reflecting continued growth in demand for our products, coupled with an acceleration in pricing momentum,” González says. “We are confident that our pricing strategy will more than compensate for the sudden runup in input cost inflation we have experienced.”

Followed by some bad

2021 aggregate production totals should be favorable once the U.S. Geological Survey presents them in full early in 2022. Photo: P&Q Staff

3. Supply chain issues persist. Although aggregate production and pricing were positive 2021 stories, the supply chain is the top story of 2021 as it pertains to the industry. 

Equipment lead times stretched out remarkably this year as manufacturers struggled to effectively source the materials and labor necessary to build. Producers, however, have grown more understanding of wait times that are extending, in some cases, by months and months.

No one seems to have an answer as to when the supply chain will normalize, but it would not be a surprise if the pain producers feel right now persists well into 2022. 

4. Energy prices are on the rise. A decent chunk of the supply chain pain producers are feeling – and will feel in the months to come – is derived from the energy sector.

As of Nov. 8, gasoline is up an average of $1.31 a gallon across the U.S. compared with a year ago, according to the U.S. Energy Information Administration. Diesel, meanwhile, is up $1.34 a gallon from a year ago. And with oil supply down domestically and an increased dependence on foreign sources, the energy environment may not improve anytime soon.

“When you decide that it’s in the best interest of the country to say we’re not going to produce more fossil fuels domestically, you impact energy markets and prices,” says Michael Johnson, president and CEO of the National Stone, Sand & Gravel Association (NSSGA), who offered additional perspective on the state of the industry in an exclusive Q&A with Pit & Quarry. “All of that comes with a cost. We need to be thinking about how that policy and those rules are making life tougher for the businesses in the aggregates industry, for businesses in NSSGA’s M&S Division and for everyday Americans.”

5. Where did all the workers go? Help wanted signs are seemingly everywhere across the U.S., and producers who had a hard time finding people before the pandemic find themselves in an even more precarious position today.

The construction industry, at least, added jobs in October for the second straight month, according to an Associated General Contractors of America (AGC) analysis of federal data. But construction industry employment remains 150,000 jobs below the pre-pandemic peak set in February 2020.

Extended unemployment benefits, a lack of childcare and kids being schooled at home were among the forces causing labor shortages in 2020 and 2021. But those forces were at least somewhat alleviated with the end of the pandemic, begging the question of whether the American worker will return anytime soon to a workplace near you.

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