Pit & Quarry, July 2015

Construction aggregates output up in first quarter T he estimated U S output of construction aggregates produced and shipped for consumption in the first quarter of 2015 was 389 million metric tons an 8 percent increase from the first quarter of 2014 reports the U S Geological Survey USGS During the first quarter of 2015 the estimated production of construction aggregates increased in seven of the nine geographic divisions USGS measures compared with the same period of 2014 The largest increases in percentages were in the East North Central West North Central and Mountain divisions Also production increased in 30 of the 43 states estimated with Texas California Florida Missouri and Washington as the five leading states The estimated U S output of construction sand and gravel produced and shipped for consumption in the first MOST U S STATES REPORTED INCREASED PRODUCTION OF BOTH CRUSHED STONE AND SAND AND GRAVEL quarter of 2015 was 159 million metric tons a 9 percent increase compared to the same period in 2014 The production of construction sand and gravel increased from the first quarter of 2014 in six of the nine geographic divisions with the largest increases in the East North Central and West North Central divisions In addition production increased in 27 of the 45 states with the leading states being Texas California Arizona Washington and Colorado In addition an estimated 230 million metric tons of crushed stone were produced and shipped for consumption in the U S in the first quarter of 2015 Thats a 7 percent increase compared with the first quarter in 2014 The estimated production of crushed stone experienced an increase in eight of the nine geographic divisions and 31 of the 46 states with the leading states being Texas Florida Missouri Pennsylvania and Georgia AGGREGATES FORECAST More of the same demand wise in 2015 Like most analysts we think the economy will grow in the 2 plus percent range for the remainder of 2015 Given that the frst quarter was very weak another year of modest economic growth is ahead Construction is returning to its lead role as a driver in the recovery phase The economy has been growing since 2010 and only now fve years later is construction adding to GDP The outlook is basically unchanged Expect modest construction materials growth for the next two years Demand growth isnt faster in my view because of structural changes since the 2009 10 recession That is fewer qualified new homebuyers more state and local revenue growth going toward pensions and benefits flat federal funding levels and slow employment growth All this Aggregates vs Construction Contracts 2005 2006 2007 2008 2009 2010 2012 2016 2015 2014 2013 2011 2004 2017 ACTUAL UNITED STATES 2nd UNITED STATES 120 100 80 60 40 20 0 Indexed 2005 100 is resulting in modest new demand for construction The chart here compares aggregates consumption with construction contracts Both lines move closely together as expected with the usual lags The chart also shows how different the last five years have been Aggregates growth has lagged well behind contracts growth The very slow gains in the nonbuilding segment the biggest driver of aggregates demand explains most of this For 2015 and beyond the relationship is returning to normal because enough contracts demand has been created to drive aggregates upward David Chereb Dr David Chereb has many years of experience forecasting construction materials and his web based forecasting models have captured every major turning point in materials demand for more than 15 years Chereb received his Ph D in economics from the University of Southern California He can be reached at david chereb@ sc marketanalytics com 8 PIT QUARRY July 2015 www pitandquarry com