Rock Products

JAN 2013

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With no new real federal money in the 2012 MAP‐21 sur‐ face transportation law, still recovering state and local tax collections and modest new housing starts, the pavements market will be uneven across the nation. Pavement work is anticipated to be down in 25 states. Growth above a 5 per‐ cent range is expected in 19 states. However, there are at least two developments related to MAP‐21 that could lead to additional market activity in the short term and strengthen the market in 2013 and 2014, Black says. First, the law's restructuring of the federal highway pro‐ gram offers state transportation departments more flexibil‐ ity in their use of federal funds. This could lead to slightly increased investment in highway, bridge and pavement work above the forecast in some states. Second, MAP‐21's expanded federal Transportation Infrastructure Finance & Innovation Act (TIFIA) loan program should also increase construction activity in some states. Black also notes that major reconstruction work along the East Coast in states that were affected by Hurricane Sandy could also be a market factor in 2013 across all modes. Ad‐ ditional federal, state and local emergency funds for re‐ building this infrastructure could be a boost as projects get underway. A major wild card in the forecast, Black says, is the so‐ called "fiscal cliff" – the dire financial situation set to occur at the beginning of 2013 if Congress and the President can't agree on tax and spending reforms. Although the "fiscal cliff" would not directly impact federal highway investment to the states, it could affect state and local finances, and thereby cause governments to pull back or delay projects. Such action in turn would have negative consequences on the highway construction market. Individual businesses may also delay capital and hiring decisions amid the uncer‐ tainty. ARTBA breaks down specific transportation construction categories in its report: Bridges and Tunnels – After a four‐year run of significant market growth – reaching a record high $28.5 billion in 2012 – the bridge and tunnel construction market will cool off in 2013, likely remaining flat at about $28.2 billion. The ARTBA forecast shows projects in eight states – California, Florida, Illinois, New Jersey, New York, Pennsylvania, Texas and Washington – will continue to account for about half of the U.S. market activity in this sector. With a number of major bridge projects on the horizon, however, the bridge and tunnel sector should rebound smartly in 2014. Ports and Waterways – Driven by expanded sea trade ex‐ pected with completion of the Panama Canal expansion project in 2015, U.S. ports and waterway construction is expected to skyrocket nearly 25 percent to $2.65 billion. Increased market activity is anticipated in California, Florida, Kentucky, Maryland, Massachusetts, Mississippi, New Jersey, New Hampshire, New York, Texas, Virginia and Washington. Airport Runways and Terminals – Airport runway and terminal construction is expected to show growth in 28 states, with sector growth overall of 4.5 percent, reaching $12.5 billion. Market‐driving states include: Alaska, Ari‐ zona, California, Florida, Illinois, New York, Ohio, Ten‐ nessee and Texas. Funding for airport projects is anticipated to increase over the next five years, largely tracking growth in passenger enplanements. Light Rail and Subways – The uncertainty caused by the 33‐month long delay in passage of MAP‐21 will be felt in the subway and light rail markets. Construction activity is projected to be down by eight percent overall. There will be some bright spots, however. Based on recent contract awards, these states will be moving forward on key transit projects: California, Florida, Georgia, Hawaii, Illinois, Kansas, Massachusetts, New York, Oregon, Pennsylvania, Texas and Washington. The forecast uses an ARTBA econometric model that takes into account a number of economic variables at the federal, state and local level. It is measuring the public and private value of construction put in place, published by the U.S. Census Bureau. The ARTBA estimate of the pri‐ vate driveway and parking lot construction market is based on data from the U.S. Census Bureau's "Economic Business Census." Construction Put-In-Place to Expand Management consulting and investment banking firm FMI predicts that construction‐put‐in‐place (CPIP) at the end of 2012 will be between $826‐$884 billion. FMI researchers also predict CPIP growth rates to be slightly ahead of GDP in 2013 and 2014. This would place the CPIP at more than $1 trillion by the end of 2014, nearly 6 percent of GDP. The predictions are included in the new report "U.S. Markets Construction Overview" published annually by FMI. Other predictions include: n Power CPIP will cross the $100 billion mark in 2013. n Residential CPIP will be back to double‐digit growth in 2013. n Transportation and healthcare CPIP will reach record levels by 2013. n Education CPIP will continue to rise achieving 2008 numbers by 2016. However, in 2013 commercial buildings, offices, manufactur‐ ing facilities, communications systems and lodging CPIP are expected to continue to underperform at an average of 60 percent of 2008 levels, off by more than $115 billion. By 2016 these sectors are predicted to only reach 70 percent of 2008 CPIP. ROCKproducts • JANUARY 2013 19

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