| Economics | ||
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April 2006
by Valentin V. Tepordei and Wallace P. Bolen |
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Crushed stone and construction sand and gravel, the two major types
of natural aggregates, are among the most abundant and accessible
natural resources. Natural aggregates have been used from the
earliest times of our civilization for a variety of purposes,
including construction. Crushed stone and sand and gravel represent
major basic raw materials and a fundamental building block of our
modern society.
The widespread use of natural aggregates is due to its general availability throughout the country, suitability for many construction applications, and its relatively low cost. Notwithstanding the low unit value of the basic products, crushed stone and construction sand and gravel are major contributors to the well-being of the United States. Since 1997, the Federal Reserve Board has used quarterly aggregates production data reported by the U.S. Geological Survey (USGS) in its calculation of industrial product indices for the United States. The value of aggregates was one-third of the total value of nonfuel mineral materials mined in the United States in 2005.
On a tonnage sold or used basis, the aggregates industry produced more than 85 percent of the approximately 3.3 billion metric tons of non-fuel minerals mined in the United States in 2005. By volume, the three largest segments of mining in the United States are aggregates, coal, and industrial minerals. The tonnage of crushed stone and construction sand and gravel produced accounts for more than two-thirds of the total of these three segments and is nearly three times the tonnage of U.S. coal produced (Figure 1). Growth in aggregates production
Until the 1970s, especially during the construction of new roads and highways, there was more construction sand and gravel produced in the United States than crushed stone. In 1972, the annual production of crushed stone was more than that of construction sand and gravel for the first time. The dominance of crushed stone has continued since that time and will probably continue into the future. One major reason for this trend is the fact that a stone quarry produces much more aggregates from a significantly smaller footprint, or area of land, than a construction sand and gravel operation. Rock formations are normally hundreds of feet thick while mined sand and gravel deposits are usually surficial alluvial deposits less than 50 feet thick. To produce the same amount of aggregates, a construction sand and gravel operation would affect a much larger land area than a crushed stone quarry. In addition, the flat alluvial terraces that are the main source of sand and gravel deposits are also preferred farmland and construction sites for new residential or commercial developments. This competition for land use is a major impediment in obtaining mining access to those areas. Despite increasing environmental and land use concerns, production continues in remaining quarries and sand pits around heavily populated areas because of high demand. Crushed stone quarries are especially prevalent in the Eastern United States and near population centers in the West (Figure 3 - bottom of page). Prices throughout time
The above-mentioned prices are average unit prices for total U.S. production of crushed stone and construction sand and gravel. These average unit prices vary by type of stone for crushed stone, and by use for both crushed stone and construction sand and gravel. For example, the 2004 average unit prices for crushed stone by kind of stone ranged from a low of $4.30 for calcareous marl to a high of $7.58 for slate. By use, the average unit price of crushed stone ranged from a low $2.38 for refractory stone to a high of $50.71 for slate flour. Uses of aggregates Natural aggregates have a wide variety of uses. Imagine our lives without roads, bridges, streets, bricks, concrete, wallboard, and roofing tiles or without paint, glass, plastics, and medicine. Every small town or big city and every road connecting them were built and are maintained with aggregates. Crushed stone and sand and gravel used for construction purposes are defined as construction aggregates. More than 90 percent of asphalt pavements and more than 80 percent of concrete consist of aggregates. Even the binder in concrete, the cement, is also made from stone (limestone). In addition, paint, paper, plastics, and glass normally require sand, gravel, or crushed stone as a constituent. When ground into powder, limestone is used as an important mineral supplement in agriculture, medicine, and household products. Natural aggregates are also being used more and more to protect our environment. Soil erosion-control programs, water purification, and the reduction of sulfur dioxide emissions generated by coal-burning electric power plants are just a few examples of what are defined as industrial uses of natural aggregates. Major production states The major crushed stone and construction sand and gravel producing states for the last 30 years and their rankings are shown in Tables 1 and 2 (see print issue), respectively. The leading crushed stone-producing state is Pennsylvania, followed by Texas, Florida, Illinois, Georgia, Ohio, Missouri, and Virginia. The leading construction sand and gravel-producing state is California, followed by Texas, Michigan, Arizona, Ohio, Illinois, Minnesota, and Washington. The production of natural aggregates is closely related to a state’s population and the level of industrial development of a specific area, as well as the distribution of natural resources. Major public works projects and commercial and private developments have a significant impact on the demand for, and therefore production of, aggregates. The information collected by the USGS represents production for consumption as reported by aggregates producers. No information is collected from the producing companies regarding the areas where the produced aggregates are used, because of the complexity of such an undertaking. In the past, almost all aggregates were used in close proximity to the production sites. As the demand for aggregates increased, especially in urban areas, significant amounts of aggregates have been shipped farther to satisfy local demand. In many areas, the distribution of aggregates is being done more and more through sales or distribution yards. These sites, usually within urban areas, are located at significant distances from the aggregates operation and have a railroad or a waterway connection with the production site. It is well known that in many areas of the country significant amounts of aggregates are shipped across state lines. Industry growth
As the aggregates industry matured, the major companies started to grow faster, either by building larger operations or through acquisitions. In the 1980s, some Australian, British, and French companies began making acquisitions in the United States in order to expand their base of operations in new areas of the country by buying existing operations and companies with significant reserves. Stricter environmental and permitting regulations made it more difficult to start a new operation than to acquire an existing one. Some of the acquired companies continued to operate as semi-independent organizations, but with the benefit of financial and management support provided by the new parent company. This trend was reflected in the decreasing number of operations and companies, especially in the crushed stone industry, while the average production per operation continued to increase. From the peak of 5,425 reached in 1975, the number of crushed stone operations decreased to 3,557 in 1985, and then stabilized during the last decade around 3,250. At the same time, the average production per operation increased steadily throughout the years from 151,000 tons in 1975 to 508,000 tons in 2004. The number of companies producing crushed stone decreased throughout the years from 1,865 in 1980 to 1,329 in 2004 (Table 3).
Reviewing the production and the number of
operations owned by large companies shows another effect of the
consolidation in both industries. In 1985, the top 10 crushed stone
companies operated 344 quarries and produced 25 percent of the U.S.
total of crushed stone. In 2004, the top 10 companies operated
927 quarries and produced 45 percent of the U.S. total (Tables 5 and
6). A similar situation existed with the sand and gravel companies.
Additional information regarding aggregates producers, such as their ranking in terms of total output, number of operations, and states where those operations are located, can be found in the USGS’s Directory of Principal Aggregates Producers, Directory of Principal Crushed Stone Producers, and Directory of Principal Construction Sand and Gravel Producers, which are published annually and are available on the USGS Minerals Information Web site at http://minerals.usgs.gov/minerals. The updated USGS National Atlas maps published in this special issue of Aggregates Manager provide detailed information regarding commercial crushed stone and sand and gravel operations such as the names of operations and parent companies, their locations, and the type of material produced.
Future industry growth The rapid growth in the production of aggregates during the second half of the 20th century was in large part due to the construction of roads and highways in the United States. According to the U.S. Department of Transportation’s Federal Highway Administration, planning of the superhighway system in the United States began in the late 1930s, and the current interstate highway system was created by the Federal-Aid Highway Act of 1956, popularly known as the National Interstate and Defense Highway Act of 1956. This year is the celebration the 50th anniversary of the passage of the Act and 50 years of improvements in the nation’s road system. The Interstate Highway System contains more than 42,700 miles of roads, all at least four lanes wide, and was officially regarded as completed in 1991, although some construction work continues. Despite the fact that the federal government funded about 80 percent of the cost of building this road system, the highways are owned, designed, built, and maintained by the states in which they are located. The only exception is the federally owned Woodrow Wilson Memorial Bridge on the Capital Beltway near Washington, D.C. (I-95/I-495). This bridge is currently being replaced, and ownership of the new Woodrow Wilson spans will be conveyed jointly to Maryland and Virginia upon completion. Recognizing the fact that the United States needs a transportation system that will sustain the nation’s economic strength and enhance its competitiveness in the global market place, the U.S. Congress approved the National Highway System (NHS) in 1996. This newly defined road system of 160,000 miles includes the Interstate Highway System, the Strategic Highway Network (STRAHNET), the Major Strategic Highway Network Connectors, and the Intermodal Connectors. About 98 percent of all roads included in NHS have been completed. While the NHS roads represent only 4 percent of the nation’s roads, they carry more than 40 percent of all highway traffic, 75 percent of heavy truck traffic, and 90 percent of tourist traffic. These major roads, as well as the significantly larger number of smaller roads serving communities all over the nation, constitute one of the major sources of demand for aggregates. The other major drivers of the U.S. economy that influence the demand for aggregates are population growth and economic development. Throughout the past 25 years, U.S. crushed stone production has increased at an average annual rate of about 2.3 percent. During the same time period, construction sand and gravel production experienced a smaller annual growth rate of about 1.6 percent. During this period, much of the growth in production was in response to the need for aggregates for the construction, modernization, and maintenance of the National Highway System. In the future, aggregates will continue to be needed for the modernization and maintenance of the existing U.S. road system as well as for increased security on our roads and in our urban and industrial areas. In addition, it is also expected that the modernization of U.S. airports will consume significant amounts of aggregates. Finally, increased production will be needed for a growing population that will be dependent on continually increasing commercial, governmental, and residential building construction. Using conservative assumptions and using the year 2004 as a base, annual growth rates for aggregates production in the 1 to 3 percent range during the next 25 years seem likely (Figure 2). Based on projections of 2.1 percent for the production of crushed stone, and 1.3 percent for the production of construction sand and gravel, by 2030, annual U.S. production of crushed stone is would be 2.8 billion tons, an increase of more than 69 percent compared with that of 2005. The annual production of construction sand and gravel would be 1.8 billion tons, or an increase of about 43 percent. At these levels of production, the amount of crushed stone to be produced during the next 25 years will be about 55 billion metric tons, substantially more than the total quantity of crushed stone produced in the 20th century. The total projected cumulative production of aggregates — crushed stone and construction sand and gravel — during the next 25 years is estimated to be 92 billion tons, slightly more than the total amount of aggregates mined between 1900 and 1999. These projections suggest that very large quantities of crushed stone and construction sand and gravel will be needed in the future and will have to come, at least in part, from resources yet to be delineated. |
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U.S.
production, consumption of sand and gravel The value of U.S. non-fuel mine production rose last year to $51.6 billion, a 13-percent increase from 2004, the U.S. Geological Survey finds in its “Mineral Commodity Summaries 2006” report. Strong demand from China has continued to drive up prices for metals and some industrial minerals, and led to increased production of some commodities, according to the report. The estimated value of domestically processed non-fuel mineral materials totaled $478 billion in 2005, about an 8-percent increase from the previous year. Mining of copper, iron ore, molybdenum, and aggregates increased, according to the report. Specific to the aggregates industry, construction sand and gravel output increased to about 1.26 billion tons, about 1.6 percent more than that of 2004. An estimated 3,900 companies from approximately 6,300 operations throughout the United States produced construction sand and gravel, valued at $7.2 billion. About 53 percent of the 1.26 billion tons was for unspecified uses. The remaining total was used for the following, according to the report: concrete aggregates, 45 percent; road base and coverings and road base stabilization, 24 percent; asphaltic concrete aggregates and other bituminous mixtures, 13 percent; construction fill, 13 percent; plaster and gunite sands, 2 percent; concrete products (blocks, bricks, pipes, etc.), 1 percent; and filtration, railroad ballast, roofing granules, snow and ice control, and miscellaneous uses, 2 percent. The leading states in production — in order of decreasing tonnage — were California, Texas, Arizona, Michigan, Minnesota, Ohio, Wisconsin, Nevada, Washington, and Colorado. Together, these states accounted for about 54 percent of the total output. In 2005, domestic sales of industrial sand and gravel increased by about 3 percent, compared with 2004. According to the report, “a robust construction sector of the U.S. economy” was the reason for the increase. The estimated output of construction sand and gravel in the 48 conterminous states that was shipped for consumption in the first nine months of 2005 was about 941 million metric tons, a slight increase from the revised total for the same period in 2004. The USGS estimates that 2006 domestic production and U.S. apparent consumption will increase slightly to about 1.28 billion tons each. Aggregate consumption is also expected to continue to grow slowly in response to a growing economy and outlays for road and other construction. “Most areas of the country will likely experience increased sales and consumption of sand and gravel,” the report finds. And although most areas of the United States will likely experience increased sales and consumption of sand and gravel, according to the report, crushed stone has been replacing natural sand and gravel, especially in more densely populated areas of the Eastern United States. What’s more, because of concern about safety, health, and environmental regulations, sand and gravel operations are expected to continue moving away from densely populated centers. As a consequence, shortages of construction sand and gravel in urban and industrialized areas are expected to increase, according to the report. Despite the expected increase this year of domestic production as well as apparent consumption of sand and gravel, there is some concern overall about the United States’ mining industry. Unrelated to the USGS report, Kraig R. Naasz, president and CEO of the National Mining Association, notes that the United States’ mining industry continues to be hurt by several ongoing barriers, including no national minerals policy. “Until the United States develops a national minerals policy and addresses other issues impacting the industry, the import reliance trend is likely to continue and deeper in the years ahead, posing a serious challenges to the national security and economy,” Naasz says in the NMA’s NMA Mining Week newsletter. To view the entire USGS report, go to http://minerals.usgs.gov/minerals/pubs/mcs/2006/mcs2006.pdf . —Tina Grady Barbaccia, Senior Editor |
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Reprinted from Aggregates Manager Magazine |
Throughout
the past century, the production of aggregates increased from about
58 million metric tons in 1900, when the collection of production
statistics for crushed stone and sand and gravel began at the USGS,
to 2.9 billion metric tons in 2005. Consumption rose from a modest
three-quarters of a ton per person in 1900 to a staggering 9.8 tons
per person in 2005.
In
1945, at the end of the World War II, the total U.S.
production of aggregates was 328 million tons. In the 1950s,
as construction activity increased and the Interstate
Highway System was begun, the production of aggregates “took
off.” By 1958, the total U.S. production of aggregates
reached 1 billion tons, and in 2005, the total was 2.9
billion tons (Figure 2). During the first 50 years of the
20th century, a cumulative total of 12 billion tons of
aggregates were produced in the United States while during
the last 50 years, that total reached 78 billion tons, a
more than six-fold increase.
In
recent years, the average unit price (price of a metric ton
of material f.o.b. plant) of aggregates has increased almost
every year, even if by a relatively small percentage (Figure
4). For example, during the last 35 years, the unit price of
crushed stone increased from $1.74 in 1970 to $6.01 in 2004,
while the unit price of construction sand and gravel
increased from $1.22 to $5.33 throughout the same interval.
But if these prices are converted to 1970 constant dollars
by removing the effect of inflation (using the consumer
price index), the unit price of crushed stone shows a
decrease from $1.74 in 1970 to $1.23 in 2004, while the unit
price of construction sand and gravel decreased from $1.22
in 1970 to $1.09 in 2004 (Figure 4). This trend was partly
achieved by the aggregates industry through significant
increases in productivity resulting from more efficient
equipment and increased levels of automation. Offsetting the
increased productivity were increases in permitting and
transportation costs.
As
the production of crushed stone and construction sand and
gravel increased over the years, so did the number of active
operations and the average output per operation. In 1945,
there were 1,470 active quarries producing an average of
89,800 tons of crushed stone, and 2,103 pits producing an
average of 61,300 tons of construction sand and gravel. The
number of operations increased each year until 1975 when the
total peaked at 5,425 crushed stone quarries, and 6,799
construction sand and gravel pits. Average production per
operation in 1975 was 151,000 tons for crushed stone (Table
3), and 94,100 tons for construction sand and gravel (Table
4).
The
number of construction sand and gravel operations decreased
from 6,799 in 1975 to 5,665 in 1995, but increased again
during the following nine years to 6,270 in 2004. The
average production per sand and gravel operation increased
steadily throughout the years and reached 198,000 tons in
2004. The number of companies producing construction sand
and gravel decreased from 4,323 in 1986 to 3,892 in 2004
(Table 4).
In
1984, the top 10 construction sand and gravel companies operated 158
pits and produced 13 percent of the U.S. total, while in 2004 the
top 10 companies operated 575 pits and produced 24 percent of the
U.S. total. The 10 leading U.S. aggregates-producing companies
listed in descending order of their total production are shown in
Table 7.
