Benchmark 2014: An Exclusive Survey

Aggregate Quarry
On Producer Opinions, Concerns and Buying Intentions.

By Mark S. Kuhar

It’s still tough sledding out there, as the aggregates industry creeps back to life a little at a time. However, there are numerous signs that the industry is gaining ground, and there is light at the end of the tunnel.

Last month’s extensive State of the Industry statistical report in the pages of Rock Products noted the increases in aggregates production and construction activity, and the optimistic tone coming from the nation’s largest stone producers.

This month, we share the results of a new, exclusive Rock Products survey, Benchmark 2014. This new annual survey will serve as an industry barometer and a frank assessment of the industry based on producer feedback.

So who are these dedicated industry professionals who took time out of their busy schedules to share information with us?

A typical survey respondent was, on average, a company officer, executive, owner or production manager, representing an operation churning out more than 2.5 million tpy. Other respondents participating in the survey came largely from, in descending order, operations of less than 500,000 tpy and operations of 500,000-1 million tpy.

More than half of the survey participants were producers of crushed stone, and sand and gravel, while about a fifth produced crushed stone exclusively. By a wide margin, firms operated in fewer than five states. National geographic location was fairly mixed.

Readership SurveyBig Issues
When it comes to addressing the key issues facing aggregates producers, the big “number-one” identified by survey participants is the construction economy, followed by transportation funding and the national economy. This isn’t a huge surprise given that all three are interrelated.

One respondent told us, “Jobs and the economy resonate most with the general public. Investment in infrastructure must be linked to those issues. Education of the public and elected officials key to funding.”

Another said, “Our main problem is congress not being able to work together to come to a long-term highway bill that is more then 20 years behind where we should be. Every year they come up with a last-minute bill that seems to appease the people but it does not get us to where we need to be to maintain the roads and bridges.”

That sentiment was echoed by another respondent who said, “We will probably get some last-minute continuing federal program for highways, however without additional funding there will be a dramatic contraction in the highway construction sector.”

Another group of interrelated issues on the minds of producers is regulatory burden and plant operations. One respondent told us, “The surging growth of federal regulations as devised by legislation or presidential fiat is a massive burden to the industry. Defense against such onerous behavior must come at the ballot box by people who are informed about the issues and prepared to vote accordingly.”

Another said, “The onslaught of regulation coming out of Washington will stifle our cost structure and increase all downstream cost.”

Here are the top 10 main concerns of aggregates producers who took our survey. A full chart with percentages appears below.

  1. Construction Economy.
  2. Transportation Funding.
  3. National Economy.
  4. Environmental Regulations.
  5. Permitting.
  6. Energy Costs.
  7. Safety Regulations (MSHA).
  8. Labor.
  9. Healthcare.
  10. Transportation.

It is interesting to compare these issues with the issues on the mind of producers 10 years ago, when Rock Products and the National Stone, Sand & Gravel Association co-produced “Critical Trends in the U.S. Aggregates Industry,” a report on industry conditions at the time.
Putting it in context, the aggregates industry was flying high back then, and production was growing every year. So it is no surprise that economic issues didn’t rate a mention. The top five issues were:

  • Environmental/Safety Issues.
  • Permitting.
  • Regulatory Oversight.
  • Transportation Lobbying.
  • Information distribution.

Regulatory and environmental issues remain big concerns today, perhaps even bigger than back then. Lobbying, and getting information out to promote company operations, are not currently on the radar screen.

Permitting is an issue that has not disappeared from the radar screen of aggregates producers. Ten years ago, it was a cause for concern, and that has not changed.

When asked if they had adequate reserves for future production, a vast majority of respondents said yes. But when asked what limits their access to reserves, permitting overwhelmingly is the answer.

But that is not the only roadblock to gaining access to adequate reserves. Survey respondents also noted NIMBY groups, access to available materials and a limited quantity of materials as additional concerns.

Equipment Capitalization
As the aggregates industry comes out of the recession, however slowly, and with a ConExpo-Con/Agg buying opportunity right up ahead, producers plan to spend some money. More than a third plan to increase their budget for equipment acquisition.

While about a third plan to spend less than $500,000, about one out of four producers plan to spend $1-5 million. For more than a third of producers, that represents an increase in expenditures for 2014.

And what do they plan to buy?

A whopping 65 percent are looking to make equipment upgrades, while 58 percent are focused on new equipment. Only about a third noted their interest in used equipment.

Other notable items for expansion are plant additions, technology upgrades, mine development and of special interest: 10 percent of those surveyed plan to invest in new plants.

Over and above consumables, such as oil and tires, the top equipment areas being considered for 2014 are drilling and blasting supplies and services; screening and sizing equipment; material handling and conveying equipment; and excavators, loaders and dredges.

Looking Ahead
When asked to describe the attitude in the aggregate industry in 2014, the answer is clear. Producers are feeling good about their prospects going forward. Sixty-three percent defined themselves as “more optimistic” than in years previous.

Not surprisingly, producers expect total aggregates production in 2014 to increase.

Survey statistics based on outreach of 10,286 digital solicitations opened by 1,448 email recipients.

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