Pit & Quarry, April 2013

BY KEVIN YANIK Report Crushed stone production up slightly in 2012 Vulcan Materials economist offers forecast at GCAA event Baron Worthington manager of economic analysis at Vulcan Materials Co shared his outlook on the various construction sectors during a session at the Georgia Construction Aggregate Associations 2013 Management Workshop in Atlanta According to Worthington housing starts is the category providing the biggest reason for optimism among Georgia aggregate producers Were coming off some really low numbers he says Still this is a great sign Housing tends to lead construction In Georgia this is happening all over the state Worthington is also optimistic about Georgia highway awards Shortterm growth is somewhat negative he says but his long term forecast is positive AGGREGATES FORECAST DCG Comparison Aggregates Forecast billion metric tons Aggregate demand to exceed 2 billion tons The U S Geological Survey estimates that aggregates consumption for 2012 was 199 billion metric tons This is about the same as our estimates over the past few months 201 but 2012 marks the fourth year of demand being below 20 billion metric tons Still the economy is recovering especially residential building so the outlook is for demand to exceed 2 billion tons during 2013 and 2014 The chart shows the DCG forecast issued in December 2011 compared to the current DCG forecast As you can see results have come in somewhat better than projected by about 8 percent for 2012 The main reasons for the better than expected outcome are higher residential and nonresidential volumes than we forecasted Considering the economy is growing a good question to ask is why isnt our forecast for 2013 14 even higher Billion Metric Tons 30 25 20 15 Feb 13 Dec 11 2007 2008 2009 2010 2011 2012 2013e The main reason its not higher is that although the economy is growing no pro growth policies have been put in place The sequester the continuing resolution and the debt ceiling limit are consuming all the political attention leaving no room so far for major reforms that will stimulate the private sector Because we think GDP will continue to grow in the 1 to 2 percent range for the next year or two there will not be enough growth in incomes and jobs to boost residential and nonresidential aggregates demand by more than modest amounts Additionally public works as a whole is flat and will not provide much of a boost to demand Fortunately as long as the Federal Reserve continues to pump more than 80 billion into the banking system every month total demand will increase When interest rates begin to increase before 2015 then the path for aggregates demand gets tricky Faster growth after 2014 is our base case Only bad policies can prevent this David Chereb Dr David Chereb has many years of experience forecasting construction materials He can be reached at dc@ davidcherebgroup com An estimated 116 billion metric tons of crushed stone were produced and shipped for consumption in the United States throughout 2012 according to the U S Geological Survey USGS which also reports 282 million metric tons of crushed stone were produced and shipped in the fourth quarter Additionally USGS reports the annual output of crushed stone in 2012 increased slightly compared to 2011 The fourth quarter output was slightly less than the output in the fourth quarter of 2011 As for construction sand and gravel its estimated consumption in the fourth quarter last year increased over consumption in the previous years fourth quarter Production increased in 20 of the 46 states for which estimates were made 4 PIT QUARRY April 2013 www pitandquarry com