Common sentiments as 2020 ended were “good riddance,” and “2021 has to be better.”
It’s not that 2020 was a bad year for construction material producers and contractors. Business was quite good, in fact, as the industry was deemed essential. Work continued in a business-as-usual fashion, with some projects moving along at even quicker paces without interruptions such as traffic that might otherwise have slowed jobs down.
2020 was not an easy year, though, with the pandemic inflicting a variety of pain points on industry businesses. The uncertainty that hovered over the industry, for example, brought about a great pause in spending. State and local governments delayed and canceled projects, and producers and contractors hesitated to buy equipment they had planned to invest in coming into the year.
Fortunately, some of the pain inflicted in 2020 is very much in the past. New or intensified pains, however, surfaced in 2021, including serious issues with the supply chain and in the labor market.
Still, producers and contractors largely forged through the obstacles that arose, putting a wealth of materials on the ground in 2021 that supported lively residential activity, a steady nonbuilding market and a nonresidential sector that provides at least one steady stream of promise in warehousing.
“Volume, from what I’m hearing, was up, generally, across the board – even in what was one of the most difficult economies for our country,” says Michael Johnson, president and CEO of the National Stone, Sand & Gravel Association. “I think we showed how essential aggregates and the materials they produce are to the continued health and well-being of America.”
Karl Lemke, Western North America sales manager of Trimble Loadrite solutions, offered a similar 2021 reflection about production.
“Business is strong and it stayed strong,” says Lemke, when asked how Trimble’s customers in the industry are doing. “Usually there’s a drop-off period around Labor Day. But people are working really hard trying to get things done. They’re just trying to stay ahead of it.”
Producers and contractors also tried to work ahead this year – and for good reason.
“Times have been bad but now times are good,” Lemke says. “So no one is wanting to shut anything down or taking anything offline because they have the demand.”
Legislative watch
Passage of the Infrastructure Investment & Jobs Act (IIJA) in November should fuel demand further in the years to come.
Producers and contractors waited for years for federal legislators to put politics aside and pass an infrastructure bill that finally addresses the nation’s crumbling infrastructure. Time will tell whether or not IIJA is the answer to the U.S.’s long-deteriorating roads and bridges, but industry leaders are optimistic the bill will create opportunities to improve them enough to make them safer and more reliable.
And that means additional opportunities to put materials on the ground in the coming years.
“For our industry, it’s certainly a shot in the arm,” Johnson says. “The fact that it’s long-term spending will give the states the ability to think long term. To know what money is coming from the federal government will give them the ability to plan and the ability to engage in big projects.”
Michael Ireland, president and CEO of the Portland Cement Association, agrees IIJA is a difference-making bill.
“This bipartisan infrastructure bill not only addresses years of underinvestment in the nation’s infrastructure, but will spur economic growth and job creation in communities across the country, improving the quality of life and our nation’s global competitiveness,” Ireland says. “As many are still recovering from the COVID-19 pandemic, this legislation will further our nation’s recovery, creating thousands of well-paying jobs.”
That the bill should create jobs is a win for the industry, because construction firms have been trying all year to cut into the jobs deficit that began in February 2020. The Associated General Contractors of America (AGC) recently reported that only 16 states and the District of Columbia have added construction jobs since the start of the pandemic.
“Although activity picked up in most states in October, construction employment remains below pre-pandemic levels in two out of three states,” says Ken Simonson, AGC’s chief economist. “The record number of job openings shows contractors are eager to hire more workers but can’t find enough qualified applicants.”
Supply conundrums
Producers and contractors everywhere are also concerned about the immediate impacts of the strained supply chain.
While manufacturers and dealers got creative to serve end users in 2021, navigating the supply environment was not easy. Many of the difficulties experienced in 2021 – availability and pricing among them – will carry into 2022.
“I think our biggest problem for 2022 is just going to be availability of parts and equipment,” says Tim Smith, director of business development at Maverick Environmental Equipment. “We have a lot ordered right now. It just seems like there’s going to be a lag.”
Applied Industrial Technologies’ Mark Kenyon agrees the supply bottlenecks plaguing the industry this year will remain in 2022 – and possibly well into next year.
“Right now the supply chain is overloaded,” says Kenyon, industry manager at Applied who covers the aggregate, cement and mining industries. “Lead times continue to increase, and demand is about 20 to 30 percent above capacity.”
Kenyon says customer demand is increasing while supply chain issues are growing.
“Not only are delivery times and network reliability issues getting worse, but as manufacturing continues to increase, so will the strains to capacity,” he says.
Mark Krause, managing director of North America at McLanahan Corp., suspects the industry will be just fine despite supply difficulties. The resiliency of producers and contractors, after all, was once again on full display in 2021.
“As people in industries, we’ve learned to adapt,” Krause says. “We adapted to [COVID], and we’ll adapt to whatever else comes our way.”