Work was once again plentiful for construction materials producers and contractors this year. A lack of available jobs certainly was not a problem.
A plethora of problems, however, swirled around producers and contractors as they went about crushing, screening and washing materials this year. Issues that carried into 2022 or intensified for many were hiring and retaining employees, sourcing equipment, managing pricing, and combating inflation and rapidly rising interest rates.
Most, if not all, of these problems will continue in 2023. Fortunately, producers and contractors proved resilient in 2022, providing reason to celebrate another largely positive year for the industry.
“2022 proved to be one for the record book despite the obstacles thrown its way,” says Kirk Rainbolt, CEO of Kimball Equipment Co., an equipment dealer with 12 locations across seven Western states. “The post-COVID hangover, inflation, labor shortages and supply chain disruptions were no match for the vibrancy of equipment manufacturers, dealers and aggregate producers.”
Kemper Equipment’s Greg Donecker observed similar dynamics in 2022.
“Mergers and acquisitions were up, for example, and producers sought out improvements to their processing plants,” says Donecker, president of the Pennsylvania-based equipment dealer that’s also a supplier of parts, service and engineered systems for aggregate and mineral processing plants. “Additionally, the rising costs associated with parts, fuel and labor compounded business challenges.”
Materials demand
FMI Capital Advisors’ George Reddin agrees the number of business disruptors impacting the industry is high. Still, he says there’s no getting around the fact that demand remained healthy for construction materials this year.
“We continue to see that,” says Reddin, managing director at FMI Capital Advisors, whose specialties are M&A and financial advisory services. “Many of the producers with pricing power got ahead of this inflation and got prices up to avoid margin squeeze.”
Wm. D. Scepaniak’s John Scepaniak, for his part, agrees demand for construction materials is healthy. As a contractor based in Minnesota, he saw the need from his customers firsthand.
“In terms of this production season’s high points, we’ve seen consistent demand increases for washed aggregates,” says Scepaniak, director of operations at Wm. D. Scepaniak, a family-owned and operated business. “Demand was up so much, in fact, that we were required to increase our equipment and overall washing capacity by 30 percent to accommodate client consumption. As a result, we’ve learned a substantial amount about advanced aggregate washing through trial and error over the past 24 months.”
Sustainability
One development that gained significant momentum within the industry in 2022 was sustainability.
“We saw a larger push than ever for sustainably sourced aggregates throughout our various regions – and from both public and private clients,” Scepaniak says. “While only historically implemented on DOT (Department of Transportation) projects as a means to mitigate project expenses, we saw our private clients invest above and beyond what new resources would cost to optimize wasted material at their sites. These projects provided opportunities for our organization to test different processing strategies and get realistic cost-per-ton figures for projects of the like moving forward.”
Rob Mineo, who works alongside Reddin at FMI Capital Advisors, also saw this trend pick up steam in 2022.
“ESG (environmental, social and governance) is a great example of something to note,” says Mineo, director at FMI Capital Advisors. “It used to be more of a buzzword, and people kind of gave it lip service. It wasn’t a huge focus of the industry, but I think it’s becoming more en vogue.”
Mineo sees more deals taking place with a recycling element.
“On top of that, we see that even smaller players are getting involved with RAP (reclaimed asphalt pavement) and RAS (reclaimed asphalt shingles),” Mineo says. “There’s a general shift in how you can take ESG and make it profitable.”
Mandates are driving much of the interest at the producer and contractor level, he adds.
“There’s a mandate for a lot of the dollars out there to be spent with ESG in mind,” Mineo says. “Not necessarily solely in environmental projects, but there has to be some sort of related idea that a company is embracing social governance. Now, we’re seeing companies actually win work based off their ESG diligence and ability.”