Brooke Wisdom

May 7, 2011

Increased Optimism

By Therese Dunphy

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty,” –Winston Churchill


Throughout the last several years, many aggregate producers may have been pessimists rather than optimists, but the tide may be turning on the age old question of whether the glass is half full or half empty.

A new quarterly study from Wells Fargo Equipment Finance, Inc. shows a two-year growth trend in the optimism quotient of those participating in its Construction Industry Survey. In 2009, the index dropped to a record low of 42 and rebounded to 66 in 2010. For the first quarter of 2011, respondents expressed more favorable sentiments pushing the index to 96, a level not seen since before 2007.

While Wells Fargo depicts these results as cautiously optimistic, it’s worth noting that 37 percent of respondents project increased local non-residential construction activity in 2011 compared to 2010. At the other end of the spectrum, only 14.5 percent expect a decrease in this category. In terms of residential construction activity in 2011 compared to 2010, 28.4 percent anticipate an increase and 16.4 percent forecast a decrease. In both categories, respondents overwhelmingly look for construction activity to improve in the second quarter of 2012 or later.

Respondents also expect equipment sales to be brisk, with nearly two thirds of distributors who say sales of new equipment will rise and more than 54 percent of distributors who call for used equipment sales to increase.

For operators hesitating to sign a purchase order, those predictions may seem wildly optimistic, but they aren’t without merit. The report notes that Volvo CE’s unit sales rose by 70 percent in 2010 compared to 2009. John Deere is projecting equipment sales to be up 18 to 20 percent for the fiscal year. Atlas Copco’s CMT division reported operating profits that were up 51 percent in 2010. And, Cat announced a 202-percent increase in profits between 2010 and 2009.

If these measures hold, operators should re-examine what opportunities the future holds.

3 Things I learned from this issue

1. The grinding action of a rod mill creates a manufactured sand that closely resembles river sand.

2. Aggregate producers should consider selling virgin aggregate to municipalities and taking stockpiled RAP off their hands. High-quality unused RAP is worth about $40 per ton.

3. When quartz is struck or rubbed together, it lights up. Cool.

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