Rock Products’ Annual Survey On the Opinions, Concerns and Buying Intentions of Producers Reveals What is on the Industry’s Collective Mind.

By Mark S. Kuhar

With the implementation of the FAST act in full swing, and President Trump’s $1 Trillion Promise to rebuild the nation’s infrastructure on the table, aggregates producers are looking ahead confidently to the 2017 production season. Aggregates production rose in 2016, and 2017 is looking like another year of strong increases.

According to figures from the U.S. Geological Survey, total aggregates production in 2016 was 2.49 billion metric tons (Gt), up from 2.28 Gt in 2015. The information was reported in its 2017 Mineral Commodity Summaries report.

In 2016, 1.48 Gt of crushed stone valued at more than $16.2 billion was produced by 1,430 companies operating 3,700 quarries, 82 underground mines, and 187 sales and distribution yards in 50 states. This represents an increase of 11 percent compared with that of 2015.

Construction sand and gravel production was about 1.01 Gt in 2016, an increase of 7 percent compared with that of 2015. Consumption of construction sand and gravel was higher in 2016 because of increased consumption during every quarter since the second quarter of 2013, with an average increase of 6 percent over the same period of the previous year.

This month, we share the results of our fourth annual, exclusive Rock Products survey, Benchmark 2017. This survey not only offers the opportunity to gauge current producer opinion, we can also compare to previous years to see what is the same and what is different.

So who took the survey this year? A typical survey respondent was, on average, a production manager, foreman or technical superintendent (32 percent) up from 22 percent last year. Company officers, executives, owners or partners also took part in the survey (28 percent). Sales executives, geologists, safety directors and others also participated in the survey.

What types of operations are reflected by this year’s survey respondents? Operations cranking out up to 500,000 tpy (38 percent) were highly represented. Plants producing more than 2.5 million tpy (27 percent) came next. Plants producing 500,000 to 1 million tpy (24 percent) followed and plants producing 1.5 to 2.5 million tpy (11 percent) brought up the rear.

The number of survey participants from producers of both crushed stone, and sand and gravel decreased this year (44 percent) from last year (62.7 percent), but producers of crushed stone only rose to 17 percent. Producers of specialty minerals and frac sand made up more than 21 percent of respondents. Geographic location was dominated by the Midwest, Southeast and Southwest, with additional strong response coming from the Northeast.

Big Issues

When it comes to the key issues facing aggregates producers, the big “number-one” identified by survey participants this year represents a return to the past. Making a jump was the national economy, which came as something of a surprise. That issue was front and center during the great recession, and had dropped to fifth on last year’s list.

Transportation funding took a dive likely as a result of the FAST Act. As usual, the construction economy and environmental regulations also merited respondent concern. This year, energy issues crept up higher on the list as well.

Here are the top 15 main concerns of aggregates producers who took our survey.

1. National economy, 85 percent.

2. Construction economy, 42.22 percent.

3. Environmental regulations, 40.00 percent.

4. Permitting, 34.81 percent.

5. Transportation funding, 29.63 percent.

6. Energy costs, 20.00 percent.

7. Labor, 20.00 percent.

8. Safety regulations, 19.26 percent.

9. Healthcare, 15.56 percent.

10. Transportation funding, 12.59 percent.

11. Equipment capitalization, 9.63 percent.

12. Liability costs (legal), 8.15 percent.

13. Credit, 5.93 percent.

14. Insurance, 2.96 percent.

15. Other, 2.96 percent.

Impacting the Industry

Respondents were asked the question “What will impact the U.S. aggregates industry the most in the near future?” One respondent told us, “With the election being over and the results being what they are it seems business and investors are finally willing to invest in projects again. In addition if the infrastructure that the Trump campaign is speaking of receives funding it will have long-term positive affects on the industry.”

That sentiment was echoed by another respondent who said, “New infrastructure spending, if approved, should boost production and overall economy of our business. As gas prices increase, North Dakota oil production may become viable again, which would be great for our industry.”

Another noted, “I feel the construction industry will see a surge due to the optimism in this country now due to Trump’s election.”

Another respondent said: “The Trump presidency will have a big impact. If they can clear regulations and permitting issues, and give aggregate producers a clear signal that business is stable or will increase, business will be good.”

One respondent took a more pragmatic view, stating, “If a roads bill is finally signed in D.C., this would ignite an increase in activity nationwide, but I am not optimistic that existing government can afford to do what is needed for our infrastructure.”

MSHA was once again on the mind of some survey respondents. One person said, “MSHA is a big problem. They do not do much for safety. More an anti-capitalist, heavy-handed department. We shouldn’t, as citizens and business people, be scared of our government agencies.”

Another bemoaned the fact that, “MSHA is pushing to put aggregate operations in the same category as coal mines,” while another said, “As long as MSHA is kept under control we should be okay. That agency is out of control.”

One respondent noted that, “Permitting has left us without rock to process or conditions that are imposed are such that we can not afford to mine the rock.”

Another said the answer to a negative perception of operations by neighbors leads to NIMBY predominance. “We need better neighbor relations, through a proactive approach,” the respondent said. “Encourage holding an open house for the neighbors, respond to neighbor complaints proactively. Use outside consultants to interact with problem neighbors. Show leadership in environmental controls, promote environmental success stories.”

Looking ahead to the future, one respondent said, “We need to find a way to get better help and to get the young generation inspired to work.”

And community relations was also on the minds of some respondents. One said, “The public has taken a negative view of our industry. ‘Not In My Backyard,’ along with social media shapes public opinion in a new and still-evolving way. Our industry has not developed the skill to deal with this at this point.”

Equipment Capitalization

With a huge ConExpo-Con/Agg buying opportunity this year, producers plan to spend some money. Approximately 30 percent of the survey group planned to spend up to $500,000. About 27 percent plan to spend $1 million to $5 million this year. Another 27 percent planned to spend $5 million to $10 million. Approximately 16 percent planned to spend $500,000 to $1 million.

And what do they plan to buy?

• New equipment, 70 percent.
• Equipment upgrades, 54.81 percent.
• Plant additions, 37.78 percent.
• Mine development, 34.81 percent.
• New plant construction, 24.44 percent.
• Technology upgrades, 22.22 percent.
• Exploration, 18.52 percent.
• Permitting and bonding, 18.52 percent.
• Used equipment, 17.04 percent.
• Quality control, 15.56 percent.
• New mine start up, 13.33 percent.
• Reclaim systems, 4.44 percent.

Over and above consumables, such as oil, tires and replacement parts, the top equipment areas being considered for 2017 are:

• Pick-up/utility vehicles, 50.37 percent.
• Screening and sizing equipment, 45.93 percent.
• Material handling/conveying equipment, 45.19 percent.
• Excavators/loaders/dredges, 42.96 percent.
• Drilling and blasting suppliers/services, 40.00 percent.
• Motors, 40.00 percent.
• Crushers, 37.04 percent.
• Haul trucks, 31.85 percent.
• Scales, 30.37 percent.
• Washing and classifying equipment, 28.89 percent.
• Automation products, 25.93 percent.
• Portable crushing/screening plants, 22.96 percent.
• Drones/stockpile measurement, 17.78 percent.
• Energy management, 14.07 percent.
• Breakers, 11.85 percent.
• Frac sand equipment, 5.19 percent.
• Other, 4.44 percent.

Looking Ahead

Aggregates producers are pretty confident right now that they are sitting on an acceptable amount of reserves for the foreseeable future. About 80 percent of respondents said they have adequate reserves. When asked what limits their access to reserves, respondents cited permitting issues, followed by access to materials and a limited quantity of materials.

In addition, 22 percent of respondents said their plants would operate at 90 to 100 percent capacity in 2017. That is up from 19 percent in 2016. Conversely, while last year’s survey revealed that 32 percent of respondents said their plants would only operate at 80 to 90 percent of capacity, this year’s survey indicated that in 2017, only 24 percent said their plants would only operate at 80 to 90 percent of capacity.

When asked to describe the attitude in the aggregate industry in 2017, the answer is clear. Producers are feeling good about their prospects going forward, with a strong 75 percent saying they are “more optimistic,” well up from last year when 49 percent noted their optimism. That tracks closely with the number of respondents who expect aggregates production to increase this year: 64 percent, up from 50.8 percent last year. 

Statistics based on information gathered by more than 350 respondents who accessed the survey.