Area concrete businesses to benefit from industry outlook

June 16th, 2017

By Doug LeDuc | Greater Fort Wayne Business Weekly

Northeast Indiana companies in the business of moving and supplying concrete can look forward to industry growth this year and next year as a result of increased spending on infrastructure and housing.

The Portland Cement Association projected last month cement consumption would reach 3.4 percent annual growth during the rest of 2017 and 2018, based on a study of data and policies it expects to affect the industry in the coming years.

“Cement and concrete largely move in tandem as a vast majority of cement is shipped directly to ready-mixed concrete producers,” Dave Zwicke, the association’s senior director of market intelligence, said in an email.

In Indiana, 72 percent of cement is shipped to ready-mixed concrete producers, followed by a combined 22 percent for concrete product manufacturers and contractors, he said.

Based on preliminary PCA estimates, Indiana’s cement consumption is expected to exceed regional and national rates of growth this year and next year, Zwicke said.

Midwest regional cement consumption is anticipated to grow roughly 3 percent in 2017 and 2018, slightly below the projected 2017 national rate, he said.

“Indiana’s expected out-paced growth is a combination of improvement over a sluggish year in 2016 for cement consumption as well as due to increased highway funding,” Zwicke said.

Continued growth this year and next year would contribute to the industry’s ongoing recovery in the region since the Great Recession, according to Rick Lehman, who works in sales at Keystone Concrete in Churubusco.

Compared with the national growth projected for the concrete industry, “we would expect in northeast Indiana and central Indiana that increase to be even higher in demand, based on our volume year over year,” he said.

A number of economists have observed that Indiana’s relatively high concentration of manufacturing employment causes it to notice a recession’s impact earlier than the rest of the country, but also benefit from recovery earlier.

Keystone’s experience was in line with that, and “we saw an uptick probably four years ago or five years ago even, whereas the nation didn’t see that uptick until a year or two ago,” Lehman said.

Beyond roads

Some of the infrastructure spending that has been increasing in northeast Indiana has gone beyond roads and bridges, he said, to include construction on the region’s power grid and on its wastewater treatment plants and related projects to comply with federal environmental regulations.

In northeast Indiana, “right now residential construction is moving along at a great pace; there’s a shortage of housing,” he said. “Any real estate professional will tell you it’s a sellers’ market.”

“Because of that housing shortage, we’re seeing increased demand for residential concrete,” Lehman said. But, even with the increased residential construction, “I don’t know if we have seen a full recovery,” he said. “I wouldn’t call us a booming area but a recovering area.”

The value of commercial construction permits issued in Allen County for the first five months of this year was up 83 percent from the same period in 2016, according to data from the Allen County Building Department.

Commercial permits through the end of May totaled $242.8 million, compared with $133 million in the year ago period. Residential permit values were up 11 percent, from $127.1 million a year ago to $141.2 million this year.

A total of 99 new home permits were issued in May, bringing the total year to date to 420, according to an analysis of data by the Home Builders Association of Fort Wayne.

Last year, 92 permits were issued in May bringing the total for the first five months of the year to 396. The average value of new home permits this year was $255,437, compared with $249,877 in the year ago period.

Infrastructure influence

PCA projections for increased cement use recently were presented by Ed Sullivan, its senior vice president and chief economist, at an IEEE-ISA/PCA Cement Conference in Calgary, Alberta, Canada.

Sullivan arrived at the projections using baseline estimates for factors including U.S. tax reform and infrastructure spending that were conservative because details on specific federal policies are not yet fully available, he said.

“While fiscal stimulus will boost cement consumption, there are other economic indicators that will temper growth,” Sullivan said. “Infrastructure policies also take time to implement, so you could be looking at 11 to 22 months before new projects truly get underway.”

“The underlying fundamentals supporting economic growth are positive, though we’ll maintain a watch on how the U.S. government addresses possible inflation and immigration policy,” Sullivan said. “This confidence in stable, sustained growth in cement consumption is likely to be unchallenged through 2018.”

President Trump has $200 billion in his budget as part of a $1 trillion investment plan to rebuild infrastructure, according to a White House statement issued earlier this month.

The statement referred to partnering with the private sector and called for a dramatic reduction in permitting time for projects to two years from 10 years. It said accelerating permitting and slashing regulations would spur growth and investment by speeding up the decision making process on infrastructure projects.

Categories Other Business News