Construction Aggregates

RECENT NEWS
Sydney Morning Herald  Jun 25  Comment 
About 1000 Olympic swimming pools of crushed rock will be churned through by the four tunnel boring machines that will work on the north-west rail link, after the $1.15 billion contract for the machines was signed on Tuesday.     
Sydney Morning Herald  May 14  Comment 
A construction company has essentially destroyed one of Belize's largest Mayan pyramids with backhoes and bulldozers to extract crushed rock for a road-building project.     
Mining Weekly  Sep 14  Comment 
Copper developer Sandfire Resources on Friday announced that it had started commissioning its 1.5-million-ton-a-year processing facility at the DeGrussa copper/gold project, in Western Australia. Crushed rock has been introduced to the...
EX-SKF  Feb 15  Comment 
Remember the radioactive apartment complex in Nihonmatsu City, Fukushima, where the concrete foundation contained the supposed "radioactive" crushed stone from the stone pit in Namie-machi, bordering the "no-entry" zone? Fukushima Prefecture...
EX-SKF  Jan 16  Comment 
(Update: The stone pit operator, Futaba Saiseki Kogyo, sold the crushed stones to the concrete company in Nihonmatsu City in Fukushima which has since closed down. There is no record kept at the concrete company of where the concrete was sold and...
Rock Products  Sep 27  Comment 
The U.S. Geological Survey reports that an estimated 331 million metric tons of crushed stone were produced and shipped for consumption in the United States in the second quarter, an increase of 6.4% compared with the second quarter of 2009
Rock Products  Aug 20  Comment 
In the second quarter of 2010, increases in domestic production for cement, construction sand and gravel, and crushed stone were large compared with those of the first quarter of 2010, but largely seasonal
Rock Products  Apr 2  Comment 
The U.S. Geological Survey reports that an estimated 255 million metric tons of crushed stone was produced and shipped for consumption in the United States in the fourth quarter of 2009, a decrease of 20% compared with that of the same period of...
Rock Products  Jan 12  Comment 
Ronald H. Gray, executive director of the Kentucky Crushed Stone Association, has been named the National Stone, Sand & Gravel Association's 2009 State Aggregates Association Executive of the Year.
Rock Products  Dec 17  Comment 
World demand for construction aggregates is forecast to expand 2.9% annually through 2013 to 28.7 billion metric tons.




 
TOP CONTRIBUTORS

Aggregates are building materials used in construction, including sand, gravel, crushed stone, and recycled concrete. Aggregates are mined and either used in their raw form (for example, as foundations) or serve as composite materials in the production of concrete and asphalt. End markets for aggregates include private residential construction, commercial construction, and publicly-funded infrastructure projects, with the latter consuming the most aggregates, usually for use in highway and road construction. A total of 3.04 billion metric tons of construction aggregates were produced in 2006, valued at $22.4 billion.[1] The aggregates industry is fragmented; markets are localized, and even the five largest aggregates companies in the United States only have a market share of 30%[2], while the top ten account for only 40%.[3]

Top Ten Aggregates Companies, 2006[4]

Rank Company Number of Active Quarries Description
1 Vulcan Materials Company (VMC) 183 Vulcan Materials Company (VMC) is the largest producer of construction aggregates in the United States by sales, with $3.3 billion of revenues in 2007.[5] VMC is divided into three segments; Aggregates, Cement, and Asphalt and Concrete.
2 (tied) Martin Marietta Materials (MLM) 174 Martin Marietta Materials (MLM) is the second largest construction aggregates company in the United States by sales, with $2.2 billion of revenues in 2007.[6] MLM is divided into five segments; Aggregates, Asphalt, Concrete, Road Paving, and Specialty Products.
2 (tied) Oldcastle Materials, Inc. 151 Oldcastle Materials, Inc. is a subsidiary of Ireland's CRH plc. Oldcastle is divided into two units; Products and Distribution and Materials, the latter of which produces aggregates, asphalt, and ready-mix concrete.
4 Hanson Building Materials America, Inc. 115 Hanson Building Materials is the American subsidiary of Britain's Hanson plc. Hanson Building Materials is divided into two units Hanson Aggregates, which sells aggregates, ready-mixed and precast concrete, and asphalt, and Hanson Pipe & Products which produces buildings products ranging from concrete pipes to clay bricks.
5 Rinker Materials Corp. 33 Rinker Materials Corp. is a subsidiary of Australia's Rinker Group, which is in turn majority-owned by Cemex S.A.B. de C.V. (CX). Rinker Materials produces concrete, aggregates, and heavy building products.
6 Lafarge North America, Inc. 52 Lafarge North America is a subsidiary of France's Lafarge, an industrial company specializing in four major products: cement, construction aggregates, concrete and gypsum wallboard.
7 Cemex S.A.B. de C.V. (CX) 32 Cemex S.A.B. de C.V. (CX) is a Mexican aggregates company. It is the world's largest building materials supplier and third largest cement producer by sales, with $21.6 billion of net sales (worldwide) in FY2007.[7]
8 Holcim Aggregates Industries 28 Holcim Aggregates is a subsidiary of Switzerland's Holcim, which sells aggregates, cement, and concrete worldwide.
9 MDU Resources Group, Inc. 47 MDU produces and sells aggregates, ready-mixed concrete, cement, and asphalt primarily in the central and western United States.
10 Florida Rock Industries, Inc. 22 Florida Rock Industries (FRK) was acquired by Vulcan Materials Company (VMC) in November, 2007.

Overview

Error creating thumbnail
Aggregates are used as base materials in foundations, or as components in the production of concrete and asphalt. The diagram to the left demonstrates how aggregates are used in road construction; aggregates are clearly essential not only as a foundation for the roadbed, but also go into the cement that makes the road itself. While this diagram is certainly not exhaustive in terms of demonstrating how aggregates are used, it shows that when they are used, they are an important part of the construction process.

The aggregates industry has been undergoing consolidation, as larger aggregates producers purchase smaller ones to gain access to quarries and reserves. Although there are only a few truly large aggregates companies remaining, consolidation was visible in the 2007 purchase of Florida Rock Industries by Vulcan Materials Company (VMC). Even with such consolidation, however, aggregates markets remain fragmented and regional due to the difficulty and inherently high cost of transport, discussed in detail below. Total aggregates production has been shrinking since 2006; in the first quarter of 2008, 248 million metric tons (Mt) of crushed stone was produced, down 14% from the same time period in 2007, while 166 Mt of sand and gravel were produced in Q1 2008, down 18% from Q1 2007.[9] Total aggregate production was 414 Mt in the first quarter of 2008, down 16% from the same time period a year before.[10] This production slowdown is due to falling demand for aggregates in the residential housing market and in publicly-funded projects, both discussed in detail below.



Aggregates Trends & Forces

Transport Costs Vary And Keep Aggregates Market Fragmented

Aggregates are usually shipped from quarries or production areas close to their end market. This is because even a relatively small amount of aggregates, in terms of value, can weigh several tons. Because most aggregates are transported by truck, transport over 50 miles is thus cost-prohibitive and infeasible.[11] However, this can be circumvented to an extent by alternative modes of transport, specifically by rail or by water. For those aggregates producers with proper facilities, rail transportation provides a cheaper alternative to shipments by truck. Transport by barge is even cheaper, but is only available to those producers with access to coastal waterways.

Quarries Are Increasingly Difficult to Develop

Quarries are obviously essential to aggregates producers' business; without quarries and the reserves they provide, there is no source of raw materials. However, quarries are subject to the same "not in my backyard" mentality as nuclear power plants and garbage dumps. As such, receiving the proper zoning permits is exceedingly difficult and time-consuming, especially near the populous metropolitan areas where demand for aggregates is highest. Indeed, the extraction of aggregates is frequently prohibited near populated areas.[12] Accordingly, owning enough quarries to provide sufficient reserves to various markets is a challenge, but necessary for ongoing business.

Private Residential Construction Demand is Depressed

The effects of the 2007 subprime lending meltdown impact the aggregates business; because new home construction has fallen sharply, demand for aggregates to be used in residential home construction (most often as driveways or foundations) has suffered. Until new home construction recovers, this particular end market will not demand as many aggregates, hurting the industry's business.

Government Funding is Necessary for Public Construction Projects

Public infrastructure projects are the single largest end market for aggregates. These projects are funded by the state and federal governments. These projects provide stability in the face of economic fluctuations, but a lack of funds will delay construction and put new projects on hold. Indeed, publicly-funded construction around the country is on hold due to budget shortfalls in many states.[13] Most government funding for highway and road construction comes from the Federal Highway Trust Fund, which in turn receives most of its money from gasoline taxes. Because Americans have been cutting back on driving due to rising energy costs, the Federal Highway Trust is not receiving as much money as it had expected, and so cannot dole out the planned amount of funds. As long as government funds are lacking and budget shortfalls continue, present and future projects will be put on hold, which will dampen demand for aggregates and hurt the industry's business.

Rising Energy Costs Affect Aggregates Producers on Multiple Levels

Rising energy costs affect aggregates companies on two levels. First, they require fuels such as diesel fuel, natural gas, coal, and petroleum coke to mine and produce aggregates. Secondly, regardless of whether aggregates are transported by truck, rail, or barge, rising energy prices increase the cost of shipments. As such, increasing energy costs are doubly effective at reducing the gross margins of aggregates companies.

Cooperative Weather is Essential to Smooth Production

The aggregates industry is seasonal; as construction takes place outdoors, more business is done during the better weather of the second and third quarters than during the comparatively worse weather of the first and fourth quarters. However, adverse weather conditions can reduce demand for aggregates, as well as increase costs and reduce production.


References

  1. USGS, "Mineral Industry Surveys"
  2. SEC, Martin Marietta Materials 10-K, pg. 10
  3. SEC Vulcan Materials Company 10-K, pg. 6
  4. USGS, "Mineral Industry Surveys"
  5. SEC, Vulcan Materials Company 10-K, pg. 69
  6. SEC, Martin Marietta Materials 10-K, pg. 9
  7. SEC, Cemex 20-F, pg. 12
  8. USGS, "Materials in Use in U.S. Interstate Highways"
  9. USGS, "CRUSHED STONE AND SAND AND GRAVEL IN THE FIRST QUARTER 2008"
  10. USGS, "CRUSHED STONE AND SAND AND GRAVEL IN THE FIRST QUARTER 2008"
  11. Morningstar Report 9-25-07
  12. USGS.com, "Natural Aggregates - Foundation of America's Future"
  13. Stateline.com, "States worry about dwindling road funds," 7/24/2008
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki