Positive signs at mid-year

By |  June 24, 2015

Economist and Pit & Quarry columnist Dr. David Chereb says most things continue to be positive for construction materials. The economy is growing, albeit slowly, inflation and interest rates are very low, and employment is gaining. Add to that the much-improved state and local fiscal balance for most states and we have sufficient tailwinds to drive material consumption higher for the next two years. Following are some bullet points about the health of the industry so far in 2015, and the future outlook.

  • From USGS: The estimated U.S. output of construction aggregates produced in the first quarter of 2015 was 389 million metric tons, an 8% increase from the first quarter of 2014.
  • From Dodge Data & Analytics: The 25% gain for total construction starts for the first five months of 2015 was comprised of growth in all three major construction sectors — nonbuilding, residential and nonresidential. Nonbuilding construction, which includes highway and bridge construction, has climbed a whopping 70% year-to-date. In its 2015 Dodge Construction Outlook, the firm predicts total U.S. construction starts for 2015 will rise 9 percent to $612 billion, a larger gain than the 5 percent increase to $564 billion in 2014.
  • From FMI: Construction activities are expected to grow at 5 percent in 2015, according to the Q2 Construction Outlook released by FMI Corp. Although the prediction is lower than last quarter, the outlook reports the highest total for construction put in place since 2008. “Construction spending continues to build on the rapid growth experienced in the industry last year,” FMI says.
  • From David Chereb: As with most analysts, we think the economy will grow in the 2+% range for the remainder of 2015. The outlook is basically unchanged — modest construction materials growth for the next two years.
  • From Pit & Quarry: The Pit & Quarry Aggregates Industry Index has risen 8.4% in the first six months of 2015 — from 285 to 309. The index number is based on a variety of industry data points, such as construction starts, industry stock prices and the producer price indices for aggregate materials.
  • From the largest U.S. aggregate producers: Martin Marietta’s stock price climbed 33% in the first six months of 2015, from $111 to $148 per share. Vulcan Materials stock has climbed 35% in the same period, from $66 to $89. Martin Marietta’s Ward Nye says his company’s aggregates product line shipments are expected to increase by 10% to 12% compared with 2014 levels, and aggregates product line pricing is expected to increase by 4% to 6% compared with last year.
  • From Europe: Europe’s two largest cement companies — Holcim and Lafarge — expect to complete a merger in July, resulting in a $44-billion market value company.
  • From the U.S. Congress: The bipartisan leadership of the Senate Environment and Public Works Committee has introduced a six-year bill to fund the upkeep and expansion of the nation’s roads, highways and bridges. The DRIVE Act increases highway spending from $37.8 billion under the current MAP-21 to $45.5 billion in 2021. Over six years, $257.5 billion will be sent to the states if the bill becomes a reality.
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About the Author:

Darren Constantino is an editor of Pit & Quarry magazine. He can be reached at dconstantino@northcoastmedia.net.

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