Almost two years ago, I wrote about the trends I believe our industry will experience through 2010. Here is a fresh updated look at a dramatically changing industry, which I presented at World of Concrete in January.
This view looks into the crystal ball for about the next 10 years and beyond, as we try harder to predict the direction the ready-mixed concrete segment of the construction materials industry will take over the next decade and even quarter century. And while some of my previous predictions are unchanged, there are a few new ones that are of major consequence. But don't fret because they bode well for the future.
Our firm has been fairly accurate with these looks into the future. We were among the first to see the rising ocean freight rates of 2004, and we predicted the cement shortages that followed, well before many saw them coming. We also bet the wheels would come off the housing market months before it happened, when nationally, they were still on a torrid pace.
These views are important. They affect the thinking of decision-makers up and down the line, from the managers responsible for strategic planning and capital expenditures to fundamental thinking by owners about the future of their companies as independent businesses.
Trends to watch
So here are four key trends I believe will be fundamental to our industry as we move into the next decade.
Growth in total concrete production could blow past our earlier estimates. I saw a 500 million yard market by 2010. While the timing of that milestone may vary by a year or two, what is more significant is our belief that the market could be 600 million to 700 million yards by 2015, almost doubling the volume from just a few years ago.
- Consolidation is accelerating even more rapidly than I predicted. While we saw the Top 25 producers commanding 55% to 60% of the market by 2010, we think that could grow to a whopping 80% of the market by 2015, or shortly thereafter. Major transactions between the multi-nationals continue unabated.
- The average selling price of concrete could pass $100 per yard, possibly well before 2015. In fact, I think the current trend in selling price, combined with historical year-over-year compounded growth rates, could take us to a $105-$115 selling price by 2015. Some markets could be more than $120-$125 for basic 3000 psi concrete, without value-added products.
- Human Resources will be a greater challenge than we first thought. Hiring hourly workers will be especially difficult in the Northeast and Midwest, markets historically dominated by unions. There also is a dearth of qualified, entry-level managers with the skills necessary to carry the industry to the next level of technological sophistication.
Other trends we identified a couple of years ago have come true, so much so, that we feel more strongly about them than we did when we first made these predictions:
Intermittent cement shortages will continue, particularly during times of rapid economic expansion.
- More sophisticated marketing will play a key role in growth for producers of every size.
- Ready-mix trucks will continue to become more sophisticated.
- Permitting and compliance will become more daunting.
- Technology will continue to drive efficiency improvements.
The time we spend looking into our crystal ball helps us better understand what the future holds for our industry. We'll see if I am right.