Dealing with Adversity
by Therese Dunphy, Editor-in-Chief
Let’s face facts; no matter how much any of us would prefer to sugarcoat it, 2008 was a tough year for the aggregates industry. As noted in our exclusive 2008-09 Aggregates Manager Forecast Survey (see “Is the Sky Falling?” p. 18), more than half of the operators surveyed reported decreased production during 2008. And, large producers and those in the West were particularly hard hit. Our figures corroborate U.S. Geological Survey reports for the first quarters of 2008. Demand is down.
But, in answer to the article’s headline, the sky is not falling. The aggregates industry is still here, albeit with a few less members working in it. The challenge that lies ahead is to determine how to improve business results throughout the coming year.
Obvious opportunities come in the form of expanding customer bases through either new locations or new products. Anecdotal evidence suggests that many operators are actively seeking both these routes. From what has been described as “cut throat competition” by some readers to capital investments to improve product quality by others, many operators are trying to get as big of a slice of market share as possible.
Traditionally, the industry’s customer mix is comprised of three-pronged market made up of nearly equal shares of infrastructure construction, residential construction, and commercial construction. No crystal ball is necessary to predict that the residential market will take time to recover and that may take the bulk of 2009. Commercial construction has slowed, but not to the extent seen on the residential side. Infrastructure construction – until recently one of the weaker legs on the stool – appears to offer the greatest opportunities during 2009.
As President-elect Barack Obama outlines his strategy for economic recovery, infrastructure continues to remain at its forefront. In addition, Obama continues to talk about building schools for the next century – thereby creating additional demand for construction materials. If these opportunities materialize, operators should be prepared to adapt their product offerings to meet this need.
Less obvious than the supply-demand side of the opportunity equation is the possibility of internal controls; 2008 wasn’t just a year marked by decreased aggregates production, it was also a year of increased oversight from Big Brother.
At the end of the year, the Mine Safety and Health Administration (MSHA) issued its first-ever pattern of violations notice to a mine operator, Patriot Mining LLC of Wise County, Va. Such a notice allows MSHA to shut down portions of a mine where significant and substantial (S&S) violations are found and is not removed until no S&S violations are found; a tall order in today’s regulatory environment.
Wise operators will prepare themselves to take advantage of not only new market opportunities, but also to minimize significant regulatory risks.
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