January 1, 2013
by Therese Dunphy, Editor-in-Chief, firstname.lastname@example.org
One term comes to mind when reviewing the results of the 2012-13 Aggregates Manager Forecast Survey: directionally correct. Overall annual business ratings indicate substantive improvements over the prior year. For the first time since 2007, more than half (50.5 percent) of respondents described 2012 as excellent, very good, or good. That percentage is up from a nine-year low of 34 percent in 2009.
Another bright spot is the percentage of operators reporting excellent business results — this number has increased for two years in a row. While these results were reported by a relatively small number of operators (6.9 percent), it’s the largest percentage of respondents in the excellent category since 2006. At the other end of the spectrum, the biggest shift in responses can be found among operators reporting poor business results. The percentage of respondents reporting the most negative results dropped nearly 10 percent between 2011 and 2012 to 11.9 percent.
Reports of improved business conditions are particularly heartening given the year-to-year accuracy of our operator responses. For example, 6.9 percent of operators said 2012 was excellent, compared to a forecast of 6.6 percent; 10.9 percent said it was very good, compared to a forecast of 12.3 percent; 32.7 percent said it was good, compared to a forecast of 26.4 percent; 37.6 percent said it was fair, compared to a forecast of 35.8 percent; and 11.9 percent said it was poor, compared to a forecast of 18.9 percent. Three of the five categories of actual results were within 2 percent of forecast, while the other two — good and poor expectations — indicate respondents to the 2011-12 Aggregates Manager Forecast Survey were overly pessimistic.
Results by category
Looking at forecast responses by a regional breakdown, the Northeast region showed the most positive results, with 14.3 percent of respondents reporting excellent business ratings for 2012. It was followed by the West (9.1 percent), the North Central (8.0 percent) and the South (2.5 percent) reporting excellent business ratings. In contrast, the South (15.0 percent) was the most likely to report poor business ratings, followed by the West (13.6 percent); the North Central (8.0 percent), and the Northeast (7.1 percent).
Although the Northeast region reported the most positive 2012 business ratings, with 57.1 percent describing the year as excellent, very good, or good, operators in the West were the most likely to report increased production. In 2012, 59.1 percent of operators in that region said production tonnages increased, compared to 28.6 percent of operators in the Northeast reporting higher annual production. A number of factors, including pricing, competition for sales, and regulatory environment, could account for the disparity between production increases and overall business ratings.
From a primary product perspective, producers of crushed stone, sand, and gravel fared the best in 2012. A total of 59 percent of them reported excellent, very good, or good results, compared to 51.8 percent of crushed stone producers, 41.2 percent of producers of other materials (including products such as recycled materials, cement, lime, and industrial minerals), and 30.8 percent of sand and gravel producers. Sand and gravel producers reported the bleakest business ratings, with nearly 70 percent (69.2) reporting either fair or poor results.
When looking at business results based on annual production, operators at both ends of the size spectrum experienced both highs and lows during 2012. A total of 12.5 percent of operators producing less than 500,000 tons per year reported excellent business results, while 9.5 percent of operators producing more than 5 million tons per year said the same. These two groups were also the most likely, however, to report poor results with 15.0 percent of the smallest size category and 14.3 percent of the largest category responding this way.
Looking ahead to next year, respondents anticipate similar results to 2012. There are slight movements in some expectations, particularly with more operators calling for a good year (40.6 percent), the most to weigh in with those expectations since 2004. The most striking prediction is the amount of operators anticipating poor business results. For the first time since 2006’s production peak, fewer than 10 percent (9.9 percent) anticipate this year’s business conditions to fall into the bleakest category.
From a regional perspective, operators in the Northeast are most optimistic about 2013 business ratings. A combined 71.4 percent expect it to be an excellent, very good, or good year. They are followed by the West (59.1 percent), South (52.5 percent), and North Central (52 percent).
Looking at forecast results by primary business, producers in the other materials category are most likely to anticipate positive ratings, with 64.7 expecting an excellent, very good, or good year. They are followed by producers of crushed stone and sand and gravel (61.4 percent), crushed stone (48.1 percent), and sand and gravel (46.2 percent).
By annual production volume, small producers (under 500,000 tons per year) are the most optimistic, with 62.5 percent predicting an excellent, very good, or good year. They are followed by producers in the 1,000,001- to 3-million-ton category (55.6 percent), more than 5 million ton category (52.5 percent), 500,001- to 1-million-ton category (50.1 percent), and 3,000,001- to 5-million-ton category (50 percent).
After five difficult years, the aggregate industry certainly isn’t out of the woods. Some areas, such as the North Central region, are still more likely to expect decreased production (32.0 percent) than increased production (28.0 percent). Likewise, crushed stone producers continue to expect a challenge with more expecting a decrease (22.2 percent) than an increase (14.8 percent). By size, mid-size producers are also more likely to expect a decrease than an increase.
These trouble spots are forecast to continue to have challenges throughout 2013. In all other categories, however, operators say they are more likely to increase production than decrease it. More stone, sand, and gravel won’t solve all of the issues facing the aggregate industry, but it’s definitely moving in the right direction.
Methodology, Objectives, and Sources
The objective of the 2012-13 Aggregates Manager Forecast Survey was to determine business, production volume, spending, and workforce trends. In November 2012, Aggregates Manager e-mailed questionnaires to a random selection of readers in the crushed stone and sand and gravel, crushed stone-only, crushed gravel-only, and other materials production categories. A total of 101 useable surveys were completed, with 66 percent being completed by owners, presidents, officers, or other executives, and another 17 percent being completed by mine superintendents.