The primary phase of the program focuses less on concrete-intensive and more on shovel-ready projects. On these, approvals are secured and work can start right away once funding is in place. The U.S. Conference of Mayors has a list of almost 19,000 such projects. About $27 billion will be allocated to the Department of Transportation to repair roads and bridges in an attempt to create what President Obama calls a “21st century infrastructure.”
This is a boon to producers such as Delta Concrete, a ready-mix producer in Cape Girardeau, Mo. Infrastructure work accounts for one-half of Delta's business. Delta did not lay off any employees during the recession and actually saw a revenue increase over this past year.
Others have not been as fortunate. Argos USA of Houston said that stimulus spending “increased the amount of projects out for bid, but no significant revenue increase was seen.”
As these infrastructure projects move to fruition, concrete consumption could show an increase of 5.4%, according to the Portland Cement Association.
You may pass large orange signs along the highway that claim the government is “Putting America Back to Work.” But some projects are less visible from your car seat. Dukane Precast of Naperville, Ill., is supplying precast panels to realign the canal that runs through Lockport, Ill. (See sidebar.)Markets: then and now
No workout routine is complete without a healthy diet. While humans need a combination of carbohydrates, proteins, and fat, producers rely on residential, commercial, and public works construction. These staples have been lacking in strong numbers for some time now. As 2010 wears on, credit remains tight for consumers and businesses wishing to expand, and consumer confidence and spending (which accounts for 70% of the economy) remain weak.
Dan Grier, regional manager for Delta Concrete, says that the decline in housing caused a 20% volume reduction for his business.
Despite a slowdown after the housing tax credits expired in April, economists were still forecasting an average increase of 15% over last year's meager 554,000 housing starts.
The National Association of Home-builders (NAHB) expects a 14% increase in housing starts this year. According to BUILDER magazine, NAHB chief economist David Crowe believes that housing “will slowly improve throughout the second half of this year and into next year, bolstered by continued low mortgage rates, affordable housing prices, and an improving jobs market.”
While the housing starts and values have fallen for several years, commercial construction is just now taking its beating. “We expect 2010 to be a year of continued commercial contraction,” says Tom Holmes, vice president of sales for High Concrete Group. “It should bottom out in the first half of 2011.”
All of this puts pressure on the public sector to anchor the concrete economy. According to an analysis of federal spending by the Associated General Contractors of America, the stimulus has gone from slowing declines in construction spending to increases due to public investments in infrastructure.
This market instability has forced companies to become more diverse. Unistress Corp., a prestressed producer in Pittsfield, Mass., took on more diverse projects, including a cooling tower for a power plant. Company president Perri Petricca forecasts a turnaround in business in this year's third quarter.Layoff picture
While construction industry unemployment stands at 20%, the White House claims government-funded projects have led to 680,000 new jobs. The concrete industry has suffered hard, as some producers in our survey laid off more than half of their employees the last two years.
However, there are signs of life. For instance, prestressed producer Nitterhouse Concrete Products Inc., of Chambersburg, Pa., laid off 40% of its workforce in its offices and plants. But the producer has already brought some workers back. Nitterhouse is not alone. Several producers have started to rehire, although most say they are waiting until 2011 or beyond when they hope business and revenue recover.
Others stuck it out. Enterprise Properties, a precast producer in Omaha, Neb., did not lay off any employees. “We tried very hard to maintain our veteran workforce by leveling manpower, company diversification, and maintaining healthy backlogs,” says company president Thomas Egan.Looking ahead
When asked about the future of the concrete industry, Fabcon's marketing director Alan Krane says, “I wish I had a crystal ball.”
Such a crystal ball might show glimmers of hope. The cost differential between concrete and its main competitor in road construction, asphalt, is swinging in favor of concrete. It may initially be cheaper to use asphalt, but concrete is getting more kudos for its durability. Concrete roads can last as long as 30 years without significant repair. The PCA estimates that by using concrete instead of asphalt, states could save as much as $100 billion on roads built between now and 2015.
Finally, some are striving for cooperation to survive this challenging market. “Vendors and suppliers need to partner together to get through these difficult times,” says Delta's Grier.CLICK HERE FOR THE FULL TCP100 LIST