Pit & Quarry, November 2017

UPDATE CRH SUMMIT VYING TO BUY ASH GROVE C RH reached an agreement to acquire Ash Grove Cement Co the family owned cement manufacturer headquartered in Overland Park Kansas for 35 billion At press time however Reuters reported that Summit Materials made an offer of its own for Ash Grove According to Reuters sources Ash Grove received a bid from Summit valued at between 37 billion and 38 billion Reportedly Summits offer is being considered by Ash Groves board while AGGREGATE FORECAST By David Chereb Housing cycle may be peaking this year T he outlook for the aggregate industry remains the same solid growth this year a pause next year and renewed growth in 2019 Of the three major segments housing should have the best outlook since we have growing employment low interest rates and growing household formation But something has changed There is no housing boom just a slow steady climb Weve said before that 2017 may be the peak for this housing cycle The main headwinds are very high housing prices and low savings for younger buyers Unless we go back to 3 percent down payments there just arent enough qualified buyers to push new home sales much higher In fact our view is that new home sales will decline in 2018 Nonresidential building CRH says its proposal remains in place subject to approval from Ash Grove shareholders Ash Grove is an excellent addition to CRHs portfolio of businesses across North America as we seek to deploy our capital into high quality businesses that enhance our global asset base and provide opportunities to create shareholder value says Albert Manifold chief executive of CRH following his companys announcement is also doing great Activity is increasing in most areas even as structural changes cast doubt on further gains The increase in employment and plenty of financing have helped to boost building activity in the past three years Going forward there are enough construction contracts in 2016 and 2017 to keep activity close to the current level The biggest negative is the fading prospects for shopping malls owing to the Amazon effect The strongest outlook is for nonbuilding Many states the Ash Grove team to CRH and look forward to further developing nine packaged products plants For more on what a CRH acquisition of Ash Grove would mean see page 52 are increasing their gas taxes and many have plans for increased infrastructure work The federal government will also be a positive although not as much as we thought a year ago With tax reform taking center stage the best we can say is that corporate tax rates will drop everything else is negotiable The chart shows the ratio of aggregate consumption to population This ratio is often used as a rule of thumb with about 7 tons of aggregate per capita So if you tell me an area with Ash Grove We welcome our longstanding relationship as part of one company In addition to cement manufacturing facilities Ash Grove operates 52 ready mixed concrete plants 25 sand and gravel plants 20 limestone quarries and Dr David Chereb has many years of experience forecasting construction materials and his webbased 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 has 1 million people I will think it probably uses about 7 million tons of aggregate per year Notice how high the ratio was in 2005 to 2007 Those were the bubble years The ratio is now about 75 well within the normal range Regionally the variations are not as great as in the past That is almost all areas of the country are doing alright and few are in a boom bust situation The dark clouds of a debt crisis hang over several states Illinois New York California and some others waiting to strike at any time but not this year The energy states seem to be adjusting to lower oil prices better than we thought U S Aggregate Consumption to Population Ratio 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source USGS SCMA 50 PIT QUARRY November 2017 pitandquarry com