In the next few weeks, our industry's attention will be focused on the federal government’s transportation authorization bill. Many concrete and construction associations have scheduled delegation trip to Washington, DC s to remind elected federal officials of the importance of a strong and well-funded plan.
I learned first-hand last week why these lobbying trips are important. Italy is demonstrating what happens when a nation struggles to invest in a strong public works construction agenda. The effect of their poorly funded and executed infrastructure plan was the main subject at last week's Samoter Exhibition in Verona Italy.
I attended what was scheduled as the Exhibition's opening ceremony for the show's 50th anniversary. What I witnessed in place of the usual ribbon cutting was a heated exchange between equipment manufacturers and Italian government officials on how to revive domestic construction activity and thus new equipment sales.
What’s the reason for the debate? In the last three years the Italian construction industry has suffered almost an 80% loss in billings. According to UNCEA, the Italian Construction Equipment manufacturer's association, the market has been in a 6-year long decline. But things could be improving. In Spring 2014, the UNCEA first projected a first quarter decline of a further 25% from 2013. But at the exhibition, a 20% upswing compared with the first quarter of 2013.
There are many reasons for the decline. Italy is still trying to recover from its horrendous credit issues. For several years the government has been a bank enforced credit limit to pay back loans that kept the country afloat. Coupled with a very high unemployment rate, the count has all but stilled construction.
But the focus on the Samoter session issue was focused construction equipment sales. One key issue between equipment manufacturers and the Italian government has been the enactment of stricter engine emission standards. The Europeans initiated these pollution cutting standards ahead of the Tier IV standards recently finalized in the US. UNCEA members point out it's very difficult to sell higher cost, less polluting, machinery in a depression. And since the Italian government has mandated that only new cleaner be sold, few contractors are buying new equipment. Instead they continue to use, purchase, and repair their older units, defeating the goal of cleaner air.
UNCEA members are also struggling in exporting to non-developed nations. The high cost of capital, high taxes, and government deadlock, eliminates the competitive edge needed in a global market.
But there's one equipment-based economic issue US concrete producers should find interesting. UNCEA is leading the national call for better concrete. In 2013 UNCEA members began to promote plant-mixed concrete. Until this past quarter, Italian concrete plant manufacturers have seen almost no sales growth either domestic or internationally. UNCEA suggests one reason for stagnant sales is that almost 85% of concrete is produced from sacks. UNCEA members are urging Italian engineers and spec writers to insist of wet-batched concrete on commercial projects, as owners would benefit from the increased quality.
Producers can learn from the Italian economic experience. We need to continually remind our public officials that investment in infrastructure is keystone of economic stability. We must ensure them that concrete’s service life will exceed the bond payments.