What 2023 can offer the aggregate industry (Part 1)

The following conversation was edited for brevity and clarity from one of two concurrent Jan. 25 discussions at the 2023 Pit & Quarry Roundtable & Conference. Part 2 of this conversation can be found here.

PIT & QUARRY: What are your sales expectations for 2023? How are ongoing dynamics (i.e., the Infrastructure Investment & Jobs Act, labor, pricing) driving or hindering your demand?

STEWART PETROVITS (ROUTE 82 SAND & GRAVEL): We anticipate a strong 2023. We’re a month in and we’re already washing material – which is unheard of. It’s a double-edged sword, right? Our customers, when the weather is good, are still pouring ready-mix, so we need to get through the winter and supply material. But we anticipate a good year.

On the recycling side, we serve the five boroughs (in New York). If nothing’s coming in and nothing’s going out, then you know you’re in big trouble. Last year was a record-breaking year across the scales for recycling. We expect that to continue this year.

I hate the supply chain term. I hate saying it’s just frustrating but, yes, you’re ordering trucks and equipment a year in advance and there’s nothing you can do about it. We just order what we need and expect it’s going to take a year to get here. It’s an interesting thought process of replacing versus repairing. You used to be able to count on our Cat dealer to repair things. You can’t count on them anymore, even though they’re a great organization.

Maybe we’re going to increase how frequently we turn things over because we know we can’t get the repairs or the replacements onto the schedule. I think it’s going to be a challenging year [in that regard], but when was the last year that wasn’t challenging?

We increased prices midyear last year and Feb. 1 [was] our new pricing date. I’m amazed. There’s been really no pushback. Customers just seem to understand that that’s what it calls for. They’ve continued to purchase materials, and projects have continued on.

TONY SPAKE (VOLVO CONSTRUCTION EQUIPMENT): [Saying] the last two years have been unique is an understatement. It will be a fantastic year in 2023 unless something catastrophic happens. The order backlog is tremendous. It’s been more about managing the cycle versus selling equipment. Managing the cycle means a lot of different things. Most importantly, it’s managing expectations with producers, customers and managing costs.

P&Q: What are your expectations for Infrastructure Investment & Jobs Act (IIJA) funds this year? What would it look like if those are disbursed as you’re expecting? If there are holdups or not as much funding comes out, how might that change your outlook for this year?

CHRIS WILLIAMS (CAPITAL MATERIALS): I’m incredibly excited about the stability that IIJA brings to our industry. We’ve got a legislature [in Missouri] that passed a substantial gas tax increase, so we’ve got the ability to leverage those funds at the state level, which should translate to projects faster than we’re expecting. We’ve already seen the results of that in the letting schedule that’s come out so far. The long-term sustainability of funding is exciting for the industry.

BRIAN VRABLIC (RULMECA CORP.): It’s dependent on when the states release money. If that comes in a glut – say midyear – I would guess from a producer’s standpoint, you’re going to struggle because your backlog is fairly full.

From a manufacturer’s standpoint, our backlog is full through the August to September timeframe already. If the glut comes in June, [producers] can ask for equipment [but] you’re not getting it. That’s going to be a real challenge for equipment manufacturers. We’re going to have to rely on distributors and dealers that might have crushers and screeners on the floor, [or] that have a rental fleet that’s ready to go. U.S. producers will have to rely on that. It’s going to be a real challenge when that money starts to flow.

If it trickles out, that’s way better because that does things from an inflation standpoint that we’re all hoping has settled. If you haven’t gotten your price increases now, come June, you’re not going to be able to get price increases. That pushback is going to start unless there’s this whomp. Unless this glut comes in Q2 or Q3 where the states are like: ‘Oh, we’ve got to spend this before fiscal year’s end,’ it’s going to be a really interesting thing from a manufacturer’s standpoint to see.

OLIVER NOBELS (SCHURCO SLURRY): We’ve yet to see ourselves get in a huge bind as far as delivery. Yes, compared to two or three years ago it’s different, but it’s not substantial. For producers or OEMs that do see big backlogs, do you think it’s due to expanding plants or new plants, or just keeping old plants running? Is that what the backlog is, or is it basically getting the components and parts you need?

VRABLIC: Because we’re a component supplier, it’s a little bit of everything. We’ve got a strong repair side of our business. Last year was probably the biggest repair number we’ve ever had. We’re also seeing it on the new plant side, and we’re seeing retrofits.

Because of the unique product that we manufacture, our core business really is retrofits. We target retrofits. I would guess mobile plant companies – they can speak to this – are seeing something similar.

I’m sure there are a lot of producers that have this ‘uh-oh’ moment where they just got a huge contract and they say: ‘We misappropriated or we didn’t realize we need another screener. We didn’t realize we need another crusher because we saw this requirement for the 35 percent recycle, [and] we thought we could handle it.’ Guess what? We can’t. We need another crusher, we need another screener now.”

DOMINIC NASSO (BUFFALO WIRE WORKS): From that perspective, we’re a screening media and parts manufacturer. What we’ve done is with our provision system, we’re able to see customer systems and reach out to them and say: ‘From a consumer’s standpoint, you’re going to be needing this part. So, at a point in time, place that order.’ We try to get ahead and advise our customers what they’re going to need ahead of time.