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The industry looks to the months and years to come (Part 2)

By |  August 17, 2021
Photo: PamElla Lee Photography

AMCAST’s Tomaso Veneroso expects 2022 to be an exciting year. Photo: PamElla Lee Photography

The following transcripts were edited from two concurrent discussions at this year’s Pit & Quarry Roundtable & Conference. The transcript from the second session begins in this post. This conversation was edited for brevity and clarity.

P&Q: The end of the pandemic is near. Moods are improving, and optimism is becoming more commonplace. Producers: What are your expectations in terms of aggregate demand for the rest of 2021? Are you prepared to meet higher demands? Categorically, what might the nonbuilding (i.e., roads, bridges), nonresidential and residential markets be capable of delivering? Do you have an early beat on what 2022 might look like for your business? Equipment suppliers and others: What are your business expectations for the rest of the year, and how are you forecasting equipment sales to the aggregate industry to be? What dynamics are most at play, and what potential challenges do you foresee this year and into 2022?

JOHN SCEPANIAK (WM. D. SCEPANIAK): The moving factor to our growth and meeting client demands – and going beyond – has been workforce issues. That’s still an issue that we’re trying to solve, and each and every [year], we improve our internal processes in creating development retainage, but it’s a never-ending battle. It’s something that – regardless of if you’re a producer or an equipment manufacturer – in this new age, it’s seemingly challenging to get people to come to work regardless of industry. So that’s something that’s affecting us still.

Pit & Quarry Roundtable & Conference 2020

Layton

RYAN LAYTON (JOHN DEERE): I think that’s absolutely going to be the challenge. We’re basically booked out through the rest of the year as far as work goes, which is great to hear. That’s a good thing for the company. But, the challenge will be labor in the factories and labor of our suppliers. Finding labor is definitely a challenge. Then, after that, microchips and things like that go into the machines, and that will be something we’ll be fighting a battle against. But, we’re optimistic. We see the rest of 2021 as going well. We expect 2022 to be a great year as well, but we have to figure out some of those factors as we go.

SCOTT DICKSON (HANSON AGGREGATES SOUTHEAST): I can’t remember an economic cycle like this. It was a slow recovery from 2010 to 2020, but it grew the whole time. It’s been a V-shaped recovery, and I see another five years in front of us. If we get the infrastructure program, that’s essentially a 15-year continuous development cycle. Our business relies on a cycle every seven years of: slow down, clear the deadwood, make some investment and move on again from a new paradigm. As an industry, we will struggle to make the investments fast enough to keep up with what could be in front of us. If it grows at strong single digits, which will be my expectation for our area, you’d accumulate that over a five-year period, which is probably a reasonable horizon given the shock behind us. That’s a very significant growth of the industry. I’m talking 35 to 50 percent.

TOMASO VENEROSO (AMCAST): 2022 for us is going to be very exciting. It’s nice to navigate through challenges that come out from a tough time from an organizational standpoint. But I see and I feel, not only in the United States but all over the world, that there’s a lot of enthusiasm. Things are getting better. Especially in the Western world, there should be more of an emphasis from an organizational standpoint, a governmental standpoint at the state and national levels on the economy. Hopefully, this pandemic has taught us that real economy is important. It takes time for a real economy. But I think that, hopefully, state institutions can learn that a real economy is important.

Photo: PamElla Lee Photography

Thomas

BARRY THOMAS (L&H INDUSTRIAL): Our backlog has skyrocketed. Right now, we’re already talking to our customers because of freight delays. At this timeframe, depending on freight and materials, we’re going out to our customers already just to give them the expectation that we’re not going to meet their deadline. So, that affects the producers, and it’s going to affect their customers.

SHELDON SHEPHERD (TECWEIGH): I’ve chatted with my colleagues and then our dealers and reps out there with other lines that they carry, and it’s across the board. You may have some device with 50, 100, 300, 500 components in it, and one of them suddenly has a six-month lead time before it gets there. Metal prices and availability – just finding it – of course that’s going to trickle down and affect the producers. Absolutely, that is going on right now. We think it’s not going to catch up until maybe later on in 2022. So how does that affect your business? How does that affect your sales? You may get lots of orders, but you can’t ship it.

Martell

Martell

SEAN MARTELL (PRECO ELECTRONICS): The remainder of this year and the future look very promising, but because of the global supply chain disruptions that we’re still trying to get through, there’s still a lot of unknowns. Even the computer chips, you guys have seen the effect on that. We use that type of product in our radar products and our suppliers tell us they’re looking at a 52-week lead time. That gets your attention very quickly. You can’t survive in that type of environment. So far, everything has worked out well, but there’s still a lot of unknowns as we navigate through this economy and how these suppliers are going to be able to get caught up with the demand that’s on them.

MICHAEL KELLY (MASTER POWER TRANSMISSION): We’ve been producing at levels like this previously. It’s just [about] getting employees back in the shop and working. Anything we can do to encourage employees to come back to work and not stay at home is a great thing. We’re seeing in the two states that we are in that both have changed and removed the [orders] to stay at home, and I think that’s a great thing for our business.

Photo: PamElla Lee Photography

Kelly

SCOTT ALEXANDER (ARCOSA AGGREGATES): I have a sense across the industry that there is a lot of pent-up demand and backlog. There’s projects that have been put on hold because of the uncertainty in the economy and what’s going to happen. As that settles out, I expect demand to continue to rise. We’ve got some real positive signals about the infrastructure bill and what’s going to happen there. We also need to be mindful in the aggregate industry. We have a built-in catalyst for growth, which is population. There’s a per capita consumption, and years ago, it had reached about 10 tons per person. That went down a little bit the past few years, but it’s going back up. It’s getting back to that 10-[ton] level with the population continuing to increase. There’s a lot of positive factors that certainly make me feel optimistic about the next couple of years.

GEORGE REDDIN (FMI CAPITAL ADVISORS): For late 2021 and ‘22, we are beneficiaries of politically popular resurfacing of projects. We’re a shovel-ready kind of industry. So, if it passes later in the year, it’s easy to get our work out into the markets. It takes a lot longer if you’re saying we’re going to do some heavy civil major infrastructure that we have to design and get engineering, we have to pit it, get the work done. But, pave some roads – that’s easy. The mayors like it. The governors like it. Congress likes it. It looks like we’re busy and we’re big beneficiaries of that.

Click here for Part 1 of the 2021/2022 projection discussion that took place at the 2021 Pit & Quarry Roundtable & Conference.


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