February 2005

Next Steps

When our company acquired Aggregates Manager six months ago, we made two promises to readers and advertisers.

First, we promised to re-launch the publication in January with an editorial and graphics redesign befitting what was the aggregates industry’s most innovative magazine when it debuted in 1996.

Second, we promised to aggressively support the publication with investments in editorial, sales, and circulation.

Our redesign arrived on your desk last month, as promised. It is based on a great deal of input from Aggregates Manager’s loyal readers, who stood by the book even when business difficulties reduced it to a painfully thin, bi-monthly title. Your advice was to continue the magazine’s long-standing excellence in management journalism, and to expand coverage of operations practices and new equipment and technology.

The newly shaped Aggregates Manager that debuted last month is our attempt to fulfill your directives on the redesign. It reflects the advantages of aggressive support from the company in many tangible ways: lots of editorial pages, no matter how many ad pages we sell; the industry’s only monthly fold-out feature; an abundance of staff-written features and departments; and the industry’s most complete coverage of new products and technology.

Now we have taken our pursuit of editorial excellence another step forward with the addition of Therese Dunphy to our staff as Executive Editor. Therese is one of the most experienced and successful editors in the aggregates industry. Her industry career began in 1991 with Pit & Quarry and, in 1996, she became one of the architects of a bold new start-up magazine that debuted at that year’s Conexpo-Con/Agg. That new magazine was, of course, — Aggregates Manager, and Therese has been an integral part of it ever since. Through good times and bad, she has kept the magazine’s unique editorial identity intact, and with it, the magazine’s connection with aggregates professionals.

That remains Therese’s mission today. She brings expertise, leadership, and commitment to an editorial staff that reveres such virtues. Our shared goal is to create the most original, most valuable magazine this industry has ever seen...and then to improve on it every month.

That is our company’s goal, too. As much as we strive to be commercially successful, we also strive for professional excellence and to be a positive force in the industry we serve. We believe those three goals are completely compatible, and that is why we will continue to support Aggregates Manager with all the people, tools, and passion it takes to get where we want to go.

January 2005

30-year Forecasts

Electronic media in the construction industry lit up in mid-December with a USA Today feature predicting an unprecedented boom in U.S. housing, office buildings, stores, and factories between now and 2030.

That forecast was issued by the respected Brookings Institute, a Washington, D.C. think tank. The report projected a 33% increase in the U.S population by 2030, creating demand for 60 million new housing units to be built, as well as rampant construction of commercial and industrial space in population growth centers.

This scenario would seem to assure vigorous demand for aggregates for another quarter century. After all, booms in new construction inevitably create the need for more road construction and maintenance, so both of the aggregate industry’s primary markets would seem to be primed for years and years of growth.

Is this a dream too good to be true?

Yes, and maybe.

Yes because no matter what, the building market will cycle up and down. So while the 25-year trend may be incredibly positive, there will be a certain number of lean years in the mix — years when companies that carry too much debt or are otherwise exposed can find themselves out of business or permanently weakened.

Maybe, because projections based on demographic forecasts can be blown out of the water by countless other variables that influence a complex economy like ours. For example, it’s not out of the question that American citizens will demand that the rate of immigration to the U.S. be slowed at some point in the future. Since immigrants comprise a large portion of the population growth, such an act would directly reduce demand for new homes, buildings, and roads.

Similarly, if the country’s massive debt and trade deficit problems conspired to create a prolonged recession, the pace of construction would ebb. If the recession was severe, it could affect how people think and invest for years thereafter, changing the paradigm on which the Brookings Institute study was based.

A more permanent problem is the availability of resources, especially water, in the areas that account for most of the nation’s population growth, the south and west.

In the early 1990s, an economist with demographics expertise issued a similar multi-decade forecast based on how the aging baby boomer generation would affect the macro economy. Among many other things, he correctly forecast the 1990s housing boom and the meteoric rise in the stock market, since Boomers would be buying different houses, saving money at a prodigious rate for retirement, and investing retirement funds in the stock market. His forecast for a Dow Jones Industrial Average of 14,000 points by 2019 may yet come to pass, but the seeming certainty of it in 1999 perished in 2000 when American corporations simply couldn’t generate the profits and growth to justify their share prices and the Dow fell back to its current level.

Will the Dow hit 14,000 in 15 years? Maybe, though the accomplishment might get as much help from devalued currency as it does from true economic growth.

Will we have a 15-year building boom? Yes. It might not be the spectacular ascent pictured by the Brookings Institute, but strong growth is likely — with the cyclical cooling off periods that characterize our economy.

2005 (Special)

A Roadmap for Transportation

Almost unnoticed, except by the highway and construction press, was the mid-December announcement that Transportation Secretary Norm Mineta was re-upping for the second  term of the Bush Administration.

In a town abuzz about the next head for Homeland Security, the health status of the Chief Justice, the war preparedness of U.S. military trucks in the Middle East, and the usual flotsam and jetsam of political intrigue,  it's no surprise that the Mineta announcement caused barely a ripple in the capitol's waters.

In fact, it is usually that way with transportation. Quick: who was the transportation secretary in the Clinton administration? In George H.W. Bush's administration?

It is a low-profile job in the best of times, and the best of times are when the sitting President is merely indifferent to transportation. But this is not the best of times. By all appearances, this president is somewhat negative about transportation, or at least the roads and bridges part of it. Presiding over the past four years of transportation activity is a little like being the life guard at a beach on the Arctic Ocean: lots of territory, no action. The transportation reauthorization act that perished ignominiously last year was a rare opportunity to accomplish something monumental, but it ran afoul of election year politics and was shot dead.

When debate starts up on reauthorization this year, everyone expects Secretary Mineta to slip into his familiar role, pitching a plan that reduces real-dollar spending on roads and bridges despite worsening congestion and continued population growth. Like a good soldier, he is expected to sell the single virtue of the president's plan that it won't cost motorists another penny. That will probably be enough, unless the House Republicans feel more pressure to bring home jobs and money to their districts than the pressure they get to vote the President's line.

Well, life goes on. The road industry will do just fine, no matter what, and it's not likely anyone outside the road industry will ever trace the growing transportation woes of the country back to this missed opportunity.

But if you're Norm Mineta, there has to be a nagging voice at the edge of your conscience asking, "Is this the best I can do with the accumulated expertise of a lifetime in public service? Is it enough to just stand guard over an empty beach and win praise for not complaining about the loneliness and the cold?"

Please, Secretary Mineta, strive for more. Sell this president on the merits of doing what needs to be done for transportation. Sell him on the importance of expanding capacity and maintaining the condition of the road and transit infrastructure. Sell him on the political viability of this course. Yes, it would cost a couple cents a gallon more, but motorists won't argue with the tax as long as the money goes back into transportation. Survey after survey has shown this to be true. It's a chance to do something significant, something the country really needs, something that would live beyond the president's last term.

It's a chance to create a roadmap by which this country can begin solving its festering transportation problems, a roadmap that is as important to our future now as the Eisenhower interstate highway system was in the 1950s.

November/December 2004

Another Good Year Ahead?

While every economist in North America likes to fret about all the threats to the U.S. and Canadian economies, the outlook for 2005 is positive. Not giddy, mind you, but certainly good enough for well-run businesses to enjoy another prosperous year.

The threats to the economy are real enough. In the U.S., the fear is inflation, driven by (take your pick): rising steel, cement, and oil prices; a mushrooming national debt and its affect on the cost and availability of capital; and the combination of huge balance of trade deficits and reticence in some countries to allow their currencies to rise in value against the dollar.

In Canada, the main worry is the strength of the Canadian dollar, which makes the country’s commodity exports more expensive.

Lest we focus too much on the negatives, there are some good reasons to expect a good year in 2005. First and foremost, corporate profits have remained strong and companies are beginning to invest in capital improvements and expansions. This creates economic momentum in its own right, and also creates new jobs, including very desirable middle class jobs, which can help sustain demand for consumer products.

Second, many economists expect some of the inflationary pressures to ease in the months ahead. China is trying to cool off its red hot growth to avoid the nasty consequences of hyper growth and that should ease some commodity shortages. It may also persuade the Chinese to let their currency rise against the U.S. dollar, which would help moderate the trade imbalance between the two countries.

Assuming there is no catastrophic economic event bearing down upon us, demand in building construction and road markets looks good for 2005. While the housing market in the U.S. has tapered off, it remains at a high level, and other segments of the building market appear to be ascending. On the highway side, the economic recovery of 2004 has generated stronger than expected tax revenues at the state and local level, and highway spending has grown faster than inflation — even with a decrease in federal funding. We can anticipate a transportation bill in 2005 that will bring moderate annual increases in federal funding in 2005 and beyond — and more states than ever will have ample matching funds to take advantage of the new money.

While highway budgets for Canadian provinces have been flat this year, about 23% of the provincial budget managers surveyed by our sister publication Better Roads last month expect 2% to 5% increases in 2005 and none expects a budget cut.

We anticipate something close to 3% growth in the Canadian GDP and close to 4% growth in the U.S. We also expect stable demand for aggregates from the building markets and a mild increase in demand from the highway industry. Put it all together and 2005 looks like a year in which smart management will be able to make progressive improvements in a company and still take good profits.

The Politics of the Highway Bill

Nothing in the construction industry produces more political spin than the release of the Urban Mobility Study, conducted by the Texas Transportation Institute. 

In this annual Fall classic, TTI assembles impartial data relating to traffic congestion in cities and towns across the U.S., and others interpret what it all means. 

Here's how the process works. The TTI study always finds that congestion delays are worsening, and provides 20-year trend data to show how dramatically worse things are getting. 

Lobbyists for the road construction industry and highway user groups like commercial truckers immediately issue statements saying the data illustrate the necessity of investing more aggressively in road and transportation capacity.  

Simultaneously, lobbyists for environmental interests and anti-government groups like the Heritage Foundation say the data prove that you can't build enough roads to alleviate congestion. 

In this presidential election year, there is a new voice in the spin cycle: the Bush Administration has issued a statement praising its own innovative, traffic-fighting solutions for short-term congestion relief and claiming it has proposed record levels of funding for highways and transit systems. 

Nothing against the Bush Administration, but this is nearly as specious as the claims by environmental groups that roads create congestion. The Federal Highway Administration's "innovative" solutions to traffic congestion have been instituted by many highway departments over the past decade and, while they help, measures like traffic signal timing and dynamic message boards are overwhelmed by the sheer growth in numbers of cars and drivers competing for space on roads that have increased only a few percent in capacity in the past decade. 

As for the administration's proposed "record funding" for the transportation program, the road industry says the Bush proposal actually reduces the federal highway program. What's great about statistics is, they're both right. The administration's proposed 6-year budget includes more total dollars than the 6-year TEA-21 program, which set records for road and transit investment. However, TEA-21 budgets increased with each successive year, topping out at just over $30 billion in 2003. The administration program essentially holds that level of spending for six years. Nominally, that's an increase in spending. In reality, when you factor in inflation, the proposed program is a step back. 

The bad news for motorists and the road industry is that TEA-21, for all its record-setting increases in investment, succeeded mainly in improving the condition of U.S. pavements, but it had little impact on expanding capacity. 

The House and Senate have both passed larger transportation programs and spent the summer trying to hammer out a compromise with each other and the Bush Administration. The rumor mill in the capitol suggests all parties are near an agreement on a $290 billion, 6-year program. It would give the president the tax-neutral program he wants, the House and Senate some federal dollars to take home to the voters, and the road industry would get essentially a continuation of TEA-21. 

As for motorists, they get more congestion.

July/August 2004

Changing the Guard at Aggregates Manager

Should America ever revert back to a barter economy, the new owners of Aggregates Manager  will know just what to do.

A few weeks ago, we completed a deal with Mercor Media that brought Aggregates Manager to James Informational Media in exchange for Gas Industries magazine.

Each of us thought the other one's magazine was a better fit for our company.

For us, Aggregates Manager  dovetails very nicely with our flagship title, Better Roads, which serves the road construction, maintenance and management field. Any conversation about concrete or asphalt quality ultimately turns to aggregates, so we have learned from the aggregate industry's customers just how vital sand, gravel, and crushed rock are to our nation's roads and bridges, and to many other elements of our infrastructure, too.

Two of our editors have experience that relates to the aggregates industry. Editor-in-Chief Ruth Stidger spent more than a decade covering the open face mining industry for World Mining Equipment  magazine in the 1970s and early 1980s. Ruth also holds a degree in mining engineering.

And I worked with equipment managers in the quarry field for 15 years as the chief editor of Construction Equipment  in the 1980s and 1990s.

Our president and publisher, Mike Porcaro, also has many years of experience in fields related to the aggregates industry, having service as publisher of both Construction Equipment  and Concrete Construction.

While we have enormous respect for the other titles in this field, we also have great ambitions for Aggregates Manager. In the months to come, you will see three major changes in the publication:

  More editorial pages.  We believe in making a commitment to readers. That starts with putting together a complete package of information and ideas. Rather than letting advertising volume dictate magazine size, we determine how many editorial pages it will take to serve the reader and commit to publishing those pages. If we do a good job serving readers, the advertising will follow.

  More editorial resources. Along with Ruth Stidger and I, Aggregates Manager.  will be the product of senior editor Tina Barbaccia, associate editor Kerry Clines, and a dedicated group of contributing editors.

  More equipment and technology.  One of the reasons we will publish more editorial pages is to compliment Aggregates Manager’s traditionally strong management content with more coverage of equipment and technology for producers of sand, gravel, and crushed rock.

Along with these changes, suppliers to the industry will be called on by one of the largest and most experienced sales teams in the field.

Our editors are making as many visits as we can schedule to quarries and pits during the summer and fall months, and we are sending mailed surveys to readers we can't visit. Our goal is to ask good questions, listen closely to the answers, and apply what we learn to the creation of a magazine that is interesting and helpful, and brings a unique package of information and ideas to its audience.

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