Sticker Shock

Construction materials prices will be keep rising, according to The Associated General Contractors of America (AGC) The association just released its latest Construction Inflation Alert (CIA), and warned of an inflation rate for construction materials of six to eight percent, with periods of 10 percent increases possible. Construction segments like highways, that are most dependent on volatile prices for petroleum products, are particularly vulnerable to such price increases. "Private owners, public agencies that do budgeting and design, and contractors should all be aware that construction materials prices are likely to keep rising at a much faster rate than the three-to-four percent increase in the consumer price index (CPI) or broad producer price index (PPI) for finished goods," said AGC's Chief Economist Ken Simonson. "If these increases continue, I'm concerned that the inflation rate for construction materials could be double the rate of overall inflation." Simonson continued, "The extreme cost increases or volatility of some construction inputs are proving troublesome to contractors because they have been sudden, extreme and unexpected." Two factors make construction vulnerable to above-average cost increases. Contractors are generally locked into fixed quantities of materials, and construction costs are vulnerable to transportation costs and bottlenecks. Unlike consumer electronics makers, for example, contractors cannot generally make a building or a highway smaller or lighter. Contractors also require physical delivery of large quantities of goods to a specific location, in many cases from around the world and any number of influences can drive up delivered costs.. Your comment?

Hanson rumors run rampant

Check out the following article on Hanson plc. Rumors are rampant that they are the target of a major acquisition. Hang onto your hat. Your comment?

Roadless rule

According to news sources, A federal judge has reinstated the Roadless Rule, a ban on road construction in nearly a third of national forests.. U.S. District Judge Elizabeth Laporte ruled that the Bush administration failed to conduct necessary environmental studies before making changes that allowed states to decide how to manage individual national forests. The 2001 rule prohibits logging, mining and other development on 58.5 million acres in 38 states and Puerto Rico, but the Bush administration replaced it in May 2005 with a process that required governors to petition the federal government to protect national forests in their states. Your comment?

HUGE RED FLAG

Well, this doesn't sound promising. According to Portland Cement Association (PCA), although many regional markets throughout the U.S. experienced strong cement consumption growth earlier this year, a new forecast from the Economic Research department at expects the second half of the year to be quite different. In the state-by-state forecast presented last week at the PCA Committee Meetings in Chicago, chief economist Ed Sullivan predicted that the emerging weakness in residential construction will dissipate the strong growth recorded earlier in the year in many regional markets. "In July 24 states showed significant declines in housing permit activity, including traditionally strong markets such as Nevada, Florida, and Arizona,"Sullivan said. "I do not believe these declines will be temporary." According to the Summer PCA forecast Sullivan expected housing starts in 2006 to decline by 10.6 percent, followed by a similar decline in 2007. PCA's most recent forecast points to high new home inventories, raising interest and inflation rates, and slower net job creation as contributing factors to an even greater residential slow-down. The decline in residential building was not unexpected. However, according to Sullivan, the nonresidential and public construction sectors are not experiencing the growth rate predicted earlier this year. "Underlying drivers for the nonresidential sector are improving, but at a slower rate," Sullivan said. Year-to-date, U.S. cement use is up 5.6% over 2005 levels. PCA's summer projections indicated that second half weakness in residential would push the 2006 growth rate to 2.3% and to 1.2% in 2007. Your comment?

Stickler back in the game

I guess he didn't get the message the first time. Although the U.S. Senate rejected his choice last month, President Bush has renominated Richard Stickler, a former Pennsylvania mining official, to head up MSHA. Senator Robert Byrd, a West Virginia Democrat, originally put a hold on Stickler's nomination for three months, saying the White House's candidate held the industry's interests above miners' safety. When Congress adjourned for its August recess, the nomination was automatically rejected. Byrd said in a statement he hopes the Senate will turn down the nomination again. Stickler was the director of Pennsylvania's Bureau of Deep Mine Safety for six years and also worked for Massey Energy and Bethlehem Steel Company. He currently has a six-month contract to work as an advisor to the Department of Labor, which oversees the MSHA. The Health, Education, Labor and Pensions committee does not plan on holding any more hearings on the nomination, and a committee spokesman did not know when it would vote on Stickler. Your comment?

New Secretary of Transportation

Mary Peters was named the new Secretary of Transportation, replacing Norman Mineta. "Mary is an outstanding choice to be secretary of transportation," said NSSGA President & CEO Joy Wilson. "Ms. Peters understands not only the need for congestion relief, efficiency and safety for the traveling public, business, and agriculture that use the nation's multi-modal transport systems, she also fully appreciates the financing challenges involved with the systems' repair, maintenance and improvement." Ms. Peters presently is serving as vice chairman of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) Financing Commission. With her confirmation by the U.S. Senate as secretary of transportation, Peters will chair the financing commission. She served as administrator of the FHWA from 2001 to 2005, where she led efforts to enhance mobility on America's roads and bridges. According to Wilson, Ms. Peters said she looks forward to working closely with the aggregates industry and the major transportation industry, labor, business and user interests in the future. Your comment?