Exports rising

Exports of U.S.-made construction machinery gained 24 percent at mid-year 2008 compared to the first half of 2007, for a total of more than $10 billion dollars worth of equipment shipped to global markets, according to data released by the Association of Equipment Manufacturers (AEM).

All major world regions recorded double-digit growth except Central America, with a 3-percent increase. Africa led the way with a 59-percent gain followed by South America with an increase of 30 percent. The AEM trade group consolidates U.S. Commerce Department data with other sources into a quarterly global export trends report for members.

“Exports remain a bright spot for the U.S. construction-equipment manufacturing industry in these uncertain times, and whoever is elected President in November needs to focus on passage of free and fair trade agreements that eliminate barriers to commerce across borders,” said AEM Senior Vice President Al Cervero.

“The lack of U.S. infrastructure investment is eroding America’s position as a global economic power as nations around the world substantially increase their commitments to modern transportation networks. In the United States, traffic gridlock is estimated to cost $78 billion dollars a year on the American economy and productivity, in addition to adverse effects on safety and the environment. Federal legislators must take this issue seriously, and invest adequately for current and future needs as part of a longer term comprehensive strategy,” he added.

The 10 countries buying the most U.S.-made construction machinery during the first half of 2008 were: (1) Canada - $3.35 billion, up 28 percent; (2) Australia - $824 million, up 18 percent; (3) Mexico - $544.5 million, down 7 percent; (4) Chile - $406 million, up 17 percent; (5) South Africa - $369 million, up 47 percent; (6) Belgium - $362 million, up 9 percent; (7) Brazil - $258 million, up 59 percent; (8) Singapore - $235 million, up 48 percent; (9) Russia - $231 million, up 40 percent; (10) Colombia - $230 million, up 44 percent. Your comment?

Fatality #14

On August 18, 2008, a 28-year-old contractor mechanic/welder with 8 years experience was fatally injured on the surface at an underground stone mine, according to MSHA. A crane was being used to lower into place a 7,000-lb. counterweight for a scaling machine. The victim was checking alignment of the bolt holes for the counterweight when one of connectors on the rigging broke, causing the counterweight to swing and strike him. The second connector then broke and the counterweight fell on top of the victim.
Your comment?

Residential: bottomed out?

According to Jim Haughey of Reed Construction Data, almost all market drivers for residential construction declined again last month. Permits, starts and sales fell although the monthly year to date average for starts remains above the low point last December. Mortgage rates inched higher to ration scarce mortgage capital. Home affordability fell although it is still above average. Consumer confidence remains at a recession level although it increased marginally when gas prices began to decline. Home prices continued to fall. However, the decline is slowing and is increasingly concentrated in a small number of very depressed markets. Remodeling activity appears to be up slightly but the data is not reliable enough to be sure.

Inventories of unsold homes, both new and existing declined. Ultimately, it is the absorption of surplus inventories that will permit a housing recovery to begin. Another tidbit of good news was the much delayed passage of housing legislation by Congress that takes effect October 1st. The short term impact will be positive. This includes subsidies to first time homebuyers, a more explicit guarantee for Fannie Mae and Freddie Mac bonds which will keep the two mortgage giants alive for at least a few more months, FHA guaranteed mortgages with principal writedowns for up to 400,000 households at risk of foreclosure and 4$ billion dollars of “walking around” money for local government officials. Long-term, there will be a boost in inflation from this fix.

Reed Construction Data still thinks that the housing market is at or near the bottom for this cycle with little further decline ahead in starts or job site construction spending but no significant improvement until late this year at the earliest. Don’t confuse the job site with brokers’ office. Downstream, the real estate and mortgage market continue to worsen, slowing the absorption of unsold homes. Foreclosure notices will not peak until fall and actual foreclosures will continue to rise well into next year. Your comment?

Fatality #12

On August 6, 2008, a 38 year-old shift foreman with 15 years experience was fatally injured on the surface of an underground potash mine. It was the 12th metal/nonmetal fatality this year. The victim was electrocuted when he contacted an energized steel water line. One conductor of a 480-volt electrical circuit short-circuited to an abandoned heater tape where both circuits passed through a common condulet box. The heater tape, which was attached to the water line, overheated and energized the water line to 277 volts. Your comment?

Cemex loses plant in Venezuela

Venezuela seized foreign-owned cement plants on Tuesday in a show of strength as President Hugo Chavez (left) moves forward with a plan to make the top oil exporter in South America a socialist society. To cheers from workers gathered at the gates, Venezuela took control of installations belonging to Cemex exactly at midnight after failing to reach a deal in cement nationalization talks. Chavez, determined to build a state-dominated economy in Venezuela, has already taken oil and telecommunications companies from private hands and is buying a large Spanish-owned bank and a steel company. Despite losing a referendum last year that would have given him wider scope to remake the economy, the former paratrooper last month used decree powers to pass a package of laws giving the state greater powers to intervene in sectors such as food.

"Their time is up and they move into the hands of the state," Chavez said at a political rally late on Monday. Chavez wants the cement companies, as well as a major steel plant he is buying from an Argentine group, to help meet the home-building and infrastructure goals his administration has struggled with. Source: Wire reports. Your comment?

Stock analysis

According to Longbow Research analyst David MacGregor, the sell off in construction materials stocks has left many companies trading at less than half of their replacement value. Given this apparent disconnect, Mr. MacGregor said, “While we struggle to find near-term positive catalysts that equity markets will recognize due to continued weakness in residential construction, softening in some commercial segments, and uncertainty regarding infrastructure spending for FY09, at some point, we believe that either a) equity markets will recognize the disconnect and will begin to bid the shares back up to levels closer to replacement value or b) strategic buyers will step in to acquire attractive long-term assets at a steep discount.” Your comment?

Infrastructure investment

According to NSSGA, before Congress adjourned for its summer recess, Sen. Robert Byrd (D-W.Va.) introduced a $24.1 billion stimulus-spending bill with the hope that it can get to the Senate floor in September. In the House of Representatives, Speaker Nancy Pelosi (D-Calif.) has referenced a similar effort, but with a $50 billion price tag. The administration has noted repeatedly that the first stimulus checks are still reaching recipients, and they need to be given time to have an impact on the economy before another stimulus-spending bill is considered.

Included in the infrastructure spending section is $3.6 billion for highway investment, $893 million for transit, $100 million for Amtrak and $200 million for ready-to-go airport projects. In addition to the $4.8 billion, there is $400 million divided between equally the Clean Water State Revolving Fund and USDA for water and wastewater projects in rural areas. Under the categories of natural disasters, the bill would provide $1.2 billion for reconstruction of flood damaged roads or bridges, $250 million for infrastructure and economic recovery in communities affected by Midwest flooding, $360 million for repair of eligible levees and dredging, and finally $50 million to repair dams through the Watershed Rehabilitation Program. Added together, all forms of infrastructure would receive more than $7 billion in funds from the bill.

HOT lanes

According to an article in USA Today, Transportation agencies are increasingly looking to reduce congestion and make more use of sometimes under-utilized high-occupancy vehicle (HOV) lanes. Some are developing plans to allow vehicles that don't have the required number of passengers to use the lanes if they are willing to pay. There are high-occupancy toll (HOT) lanes in Seattle, Denver, San Diego, Minneapolis and Salt Lake City. Construction in at least five states is slated to begin in the next year. "Congestion has grown dramatically in the United States in the last 25 years," said Tyler Duvall, acting undersecretary for policy at the U.S. Department of Transportation (DOT). "There's a fundamental problem — a supply and demand imbalance." Your comment?