Is the Sky Falling?
As a general rule, producer optimism tapered with increasing annual production. An aberration to this trend occurred in the 500,001-1 million ton-per-year category where 15 percent of respondents say 2009 will be either an excellent or very good year.
Of the approximately 14 percent of respondents who anticipate an increase in production during 2009, 6.7 percent expect increases in the 1- to 9-percent range; 40 percent look for tonnage to increase in the 10- to 14-percent range; 6.7 percent estimate increases in the 15- to 19-percent range; 26.7 percent forecast volume upswings in the 20- to 29-percent range; and 20 percent predicted increases in excess of 30 percent.
Conversely, 33 percent of respondents anticipate a decrease in annual production for the coming year. Of those who foretell a production contraction, 15.5 percent estimate a 1- to 9-percent decrease; 25.9 percent anticipate a 10- to 14-percent decline; 10.3 percent predict a 15- to 19-percent drop; 28.4 percent forecast a 20- to 29-percent decline; and 30 percent plan for a decrease of more than 30 percent.
Looking at results from a geographic standpoint, the North Central region once again reported the most optimistic expectations with 12.6 percent predicting an excellent or very good year. Those numbers, however, were outweighed by much higher percentages in the lowest two categories. More than 50 percent of respondents in every region anticipate either a fair or poor year. The South is braced for continued economic challenges with nearly three in four producers reporting fair-to-poor expectations.
Impact on iron
When asked about plans for capital expenditures, aggregates managers described somewhat curtailed investment plans, but remained fairly focused on improving capacity and efficiency. An estimated 2 percent say they plan to sharply increase equipment investments; 8 percent say they plan to increase investments somewhat; 42 percent plan to hold investments at their current levels; 29 percent expect to decrease investments somewhat; and 19 percent project to decrease them sharply.
Filtered through the prior year’s results, this marks a shift of approximately 10 percent of respondents moving from plans to increase investments somewhat in 2008 to decreasing investments sharply in 2009. All other categories remained within a few percentage points of last year’s predictions.
By category, crushing and screening remains the most likely category to continue to draw increased producer investment. Maintenance of both equipments and trucks follows closely as producers try to stretch their investments through uncertain market conditions.
Top problems for producers
Although competition for sales took the top spot among producer concerns during 2007, it posted an 8-point gain in this year’s results. More than 31 percent described it as a major problem, with an additional 48 percent labeling it as a minor problem. Large producers, those producing more than 3 million tons per year, were the most likely to list competition as a challenge; an overwhelming 91 percent say they are competing for sales. When asked how they answered this challenge, responses ranged from improving and/or expanding product lines to seeking new markets to investing in plant and quality control equipment to lower costs and gain operational advantages. One respondent emphasized the importance of persistence as he simply replied, “Bidding, bidding, bidding.”
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