The state of the industry in the Hoosier state

Many of the aggregate producers who descended on Indiana for the industry’s national events in February found themselves in a state where the economy and business challenges are very much like their own.

The construction materials industry, for example, could always be better in the Hoosier State. But Indiana producers are coming off yet another good year with robust demand for crushed stone, sand and gravel.

Passage of a federal surface transportation infrastructure bill is, of course, still wanted within state, but the Indiana General Assembly, recognizing a need to enhance road repairs, passed a monumental road-funding bill (House Enrolled Act 1002) in 2017 that elevated the gas tax from 18 cents to 28 cents per gallon. The bill tied the gas tax to inflation, providing an additional 1-cent boost for the state every year.

The bill also provided the aggregate producers situated in Indiana a much-needed boost.

“It’s been a pretty good year for our members based on where I sit,” says Calvin Lee, the executive director of the Indiana Mineral Aggregates Association (IMAA) who joined the association in 2018. “One of the reasons for that is the road construction environment. We were very blessed in 2017 for our legislature to recognize the need to fund a robust highway construction budget. There are elements in that deal where the state of Indiana is on track for record numbers in highway construction for the next few years.”

Opportunities & concerns

Most U.S. producers don’t have this kind of support from their state. Lee, who spent the 11 years prior to IMAA with Indiana Constructors Inc. (ICI), the trade association representing Indiana’s highway, heavy and utility construction industry, partly attributes passage of the 2017 road-funding measure to industries like ours that rallied their collective voice together.

“The legislators living in the state recognize that the roads are crumbling because of age,” says Lee, who spent the first 22 years of his career with the Indiana Department of Transportation. “It’s time to take a holistic approach, stop Band-Aiding the thing and improve our roads.”

Interstate 69, which AGG1 and NSSGA Annual Convention attendees may navigate as they converge on Indianapolis, is one of the more highly visible road projects in the state, according to Lee. Still, there are other ongoing projects that require boatloads of aggregate.

“There are some commercial building projects that are coming into fruition that will be very interesting and take a lot of materials and resources,” Lee says. “FedEx is in town (Indianapolis) expanding, Amazon is expanding here. There have been other warehouses coming to town that propose opportunities for materials.”

While aggregate demand is healthy in public works and construction, the residential market drives demand as well.

“It seems like residential construction is popping up everywhere, including the mixed-use,” Lee says. “That’s happening more toward the urban areas like downtown Indianapolis.”

Dana Boyd, COO at NALC, largely likes what he sees in terms of demand, as well.

“We deal with counties and municipalities,” says Boyd, whose company employs 40 people. “Heavy industrial is going nuts. We’re seeing major growth around the suburban areas. We’re seeing warehousing. We’re seeing large retail chains like Menards and Walmart popping up all over.”

A number of the indicators for aggregate remain positive, Boyd adds, but the next couple of years may bring unwanted change.

“As we look to where we’re going, the monies are being generated, the opportunities are there, there are incentives for people to grow, the investors are cutting loose a little bit of their purse strings, interest is still cheap for a lot of us and capital is available to grow,” Boyd says.

“But what’s going to happen, with the presidential election coming up and the turmoil there, people are going to get a little more conservative and back up in the next year or two. The stock market is going to start driving some things locally.”

With the wounds of the Great Recession still fresh, investors only have to look back 10 years for a reminder of what happens when the bottom drops out.

“If you look back to 2008-09 when the recession really hit hard in Indiana, a lot of these larger companies and machine shops laid people off,” Boyd says. “Some of them closed their doors. These companies are trying to retool and build back up, but they’re wary. There’s a lot of concern and fear out there for the second recession – that boom-and-bust scenario.”

The number one challenge

The other headache Indiana’s aggregate producers are dealing with is tied to labor. Like producers in other states, hiring quality people and retaining them is a challenge that’s intensifying.

“The future of the workforce is a concern to our members – just like every other industry,” Lee says. “The challenge is finding skilled, quality workers more so than the numbers.”

Boyd agrees Indiana has a major problem here. The worker shortage is even affecting the industry’s ability to get construction projects done efficiently.

“The jobs are there but the engineering and installation are not,” Boyd says. “The state is trying to hire additional engineers and inspectors. Wages are getting high.”

The state of the labor force is cornering producers into tough operational decisions, as well.

“I’m going to have to force myself into some automation controls, and I’m using more and more contractors,” Boyd says. “The cost goes up. I’ve got to look at economies of scale. Do I get larger trucks and reduce an employee because I’m having a hard time getting employees?”

To Lee, there isn’t one silver bullet solution to this problem within Indiana. He is, however, a proponent of a multi-pronged approach.

“I think it’s important to work this from several different aspects,” Lee says. “From the bottom up, we would be making those particular candidates aware of our industry and that there are very good careers that can be built here. So when you’re leaving high school – and maybe even before that – you think about this industry because there’s some opportunity.”

From the top down, Lee identifies several sources that can drive people toward the good-paying jobs available in the aggregate industry.

“The top-down approach is more about making those who guide careers aware,” Lee says. “It’s legislators and the various folks who can raise the flag and steer particular candidates this way.”

Promoting the opportunity to serve in a leading capacity within our industry is a story worth telling, too.

“One of the legacies with my previous association was working with the early to midlevel career managers within the industry to help ensure that we will be strong in the future with our leadership,” Lee says. “Somebody recognized the need of that before I came to ICI, but I helped nurture that program. We’re looking to do something very similar with IMAA.”