Por: Pit & Quarry Staff, (01/2012)


Around the table - Pit & Quarry's annual Roundtable & Conference was held in Oak Brook.


The roundtable event was divided into two sessions, with different participants in each. Following is an abbreviated transcript from one discussion, while the transcript from the other session ran last month, in Pit & Quarry’s December 2011 issue.



RICHESSON: As always, we’ll begin with a discussion about the economy, which hasn’t changed much since we met in Nashville last fall [2010]. We’d like to hear from you about how the economy is affecting your business and other businesses in your market area. What effect is this having on you and your customers? And is equipment financing still a concern?

ODGERS: In the domestic market, we find that new equipment sales are in the fair to good range, somewhat consistent. The niche market of Latin America, the focus is extremely strong in construction activity. Our total volume is up substantially this year, about 70 percent. That’s not just a good economny. That’s some of the niche markets of Latin America. And key niche areas of silver and gold mines, for example, are strong this year.

RODRIGUEZ: I view the US market as flat. Nothing significant is happening. You got some replacement business. There is the old equipment that, sooner or later, has to get replaced. So that happens. But the situation is export is very, very strong right now. And it makes the difference to a US manufacturer what your export standing is and whether they recognize you as a reliable supplier. So it pays dividends to make an effort to become known, go to those markets, the same as you would go to customers here in the US. You have to treat those customers with the same respect and courtesy that you would with a customer in the US. For the foreseeable future, that’s going to remain the situation for most American producers of processed equipment because we have a very mature market.


HEINEMANN: We definitely see that there’s growth in the mining segment, in the business with gold, and it is going to continue for the foreseeable future. So there is a fair amount of business obviously going to Latin America, to Asia, certainly South Africa and Australia, no question about it, that’s going to continue to be doing very well for the foreseeable future. What we see, as it pertains to the construction business, there is a fair amount of activity going on that is supporting those mining businesses, whether it be infrastructure, certainly Marcellus shale is a big thing. So there is a fair amount of activity that we were able to grab a hold of in the construction arena that actually supports mechanisms in the mining business. As it pertains just to general construction, we are seeing some replacement business. We are seeing aftermarket services pick up a little bit with parts and service. For next year, if you want to get into the economy, I don’t see it getting any better.


KRAUSE: If we’re banking on our government to bail us out of our business right now, that is not a comfortable position for everybody to be in. The discourse that goes on in Washington and the negativity and the polarization of the parties – it doesn’t matter which side you’re on – to men, it doesn’t sound like much of anything is going to get done long term. So then, as you try and forecast the business going forward, it’s hard to say we’ve got a stable base to build on. Now, on the positive side, you get the nice, big job that’s nearest to your client, so you secure that. But then what does that mean from an equipment standpoint? That means you’ve got to rent. And I would say trying to rent equipment is tough. There is not a lot out there.

RICHESSON: Chris, from a producer’s perspective, can you talk about what you’re seeing in California?

PERI:  It’s something that we get a lot of recap work and everything like that from a lower level. We know for a fact it’s going to come back, most likely in tow, two-and-a-half years. So a lot of it is asphalt/repave work. So if you look at asphalt/repave, same thing, we have unemployment in California that is in the teens right now, with Nevada in the high teens. It is very difficult. So we don’t have any outside help near California right now. It is going to be very difficult moving forward.

BARTRAM: From the traditional business in the highway market and the residential market, it is now swinging toward making asphalt chips and wind turbines, supporting the products required for wind turbines and for gas wells. We are also seeing replacement of machines to make those chips, because a lot of producers weren’t set up to make chips for the blacktop and the roads that had to be resurfaced. Other than the rebuild or the replacement of machines, we’re not seeing a lot of turnkey projects either.

ALEXANDER: A lot of projects are out there, but they’re just not ready to go forward yet because there is no confidence in the general economy. And there are financing concerns. It makes you a little optimistic in thinking in another year or two, or maybe with a change in administration, these projects are going to come out of the ground and things are going to pick back up. We just put a new plant in Tennessee. In making the orders we thought that there’s not been a lot of activity out other, so all this equipment should be readily available. And we were surprised that the manufacturers had cut back, and things we thought would be on the shelf were not.

MAIO: The states need to get their budgets under control, instead of using the federal dollars to fill the gaps in their own state budgets. Until they get their houses in order, those dollars aren’t going to go out and get put out to work.

KUEHL: What’s interesting to me, we’re sitting in the room. We’ve got Krause who just go back from Brazil, and Maio is over in China It makes us stronger because people are diversifying. They have to in order to survive. So there is a lot of diversification happening for us. We are focusing on some of the other markets. Diversification is what most important for everyone sitting in the room.

GARRISON: For us, forecasting is a very difficult thing. We are breaking into the other markets as well and still trying to stay focused on the US core market. But it’s definitely the multi-layer things. Everyone’s ramped down, whether you’re a manufacturer, producer, and distributor. Everybody is ramped down, controlling costs, trying to manage cash, whatever cash they have. And everyone has learned how to do things with less people and still get the job done. But when things start to pick back up, all this pent-up demand, both for equipment, for the road building, for bridges, it is going to come to a head. And it is going to take us far longer to ramp back up to that than we’re going to want it to take, and particularly for our vendors.

REDDIN: One piece of good news may be P3 activity. It moves slowly, but it is coming. We see it dropping down from the major projects into medium-sized projects. The next 12 month are going to be very enlightening, and we’re fairly optimistic that is going to be a big factor.

RICHESSON: Perhaps no topic strikes as much passion among producers as the Mine Safety & Health Administration (MSHA). Has the agency changed for better or worse under Joe Main?

HEENAH:  MSHA has become more aggressive than ever, pushing the envelope more than ever. They are doing things they haven’t done before. They are interpreting things the way they haven’t done before. It‘s just a general upward creep in the regulator environment.


MAIO: MSHA sees larger companies with deep pockets, who have the ability to pay those fines. They have the money to make these expensive improvements. The level of enforcement to smaller, independent and the larger producers is much different. MSHA goes into these smaller sites and knows if I give these guys 80 citations and its $40,000, well, he can’t pay it. I will put him out of business. But he knows if he comes one of my sites, people are probably going to get fired, things are going to happen, those things are going to get fixed .A lot of those regulations save people’s lives, but it’s the consistency of what enforcement is done and less gray areas and areas for interpretation.

HEINEMANN: The problem is there is just no parity. There is absolutely no parity in how they govern.

ALEXANDER: It gets people really heated, and especially me over the years, and you reach a level of certain safety standard and a culture, which you put in your organization, and you meet that. And it gets frustrating when you get multiple citations for not having the right type of extension cord in your office or having a an that’s not grounded, but it’s not even plugged in. I am on the board of the National Stone Association. There’s always so much on the highway program, bit we really need to do something about MSHA. There is never an easy solution.  

REDDIN: In the early days of the investment in safety practices, it was a win-win. It was great for the employees; it would help the companies run their businesses better, save on insurance, etcetera. But the question, and my sense is, that maybe it has swung now to where it is not quite as efficient, and it’s an added cost without corresponding returns.

KRAUSE: Our relationship with MSHA has been a lot better in the last couple of years. But actually, our numbers of citations and warning and everything, they’re down significantly.  I don’t know if I can say why.   We’ve kind of embraced MSHA more and kind of invited them in on a much more regular basis. And even though it’s different people from time to time, there is always going to be the inconsistency. From our viewpoint, MSHA has been easier to deal with lately than maybe some other people.

HEENAH: More than half of the accidents last year were of the type where the individuals just make the mistake. He’s got all the protection there; there is no need to do this. And they’re really just trying to do their job, in a way. They make a mistake or they are overambitious or saving time. And that’s the part to get a hold of. What MSHA enforces in mostly stuff that has nothing to do with that. The top 10 violations, recordkeeping is in there, for example .I suppose it’s one of these things that we just have to keep talking about.

RICHESSON: We’re in the middle of yet another extension of the highway bill, with little sign from Congress that a large, multi-year, highway-funding bill is imminent. The Senate is proposing a short-term, two-year bill at about current levels, while the House is proposing a long-term, six-year bill, but with about one-third fewer dollars per year. What are your thoughts?

KRAUSE: I’d be surprised if they can get the two years. If they can’t fund the government beyond November, to next week or whatever it is, do they really think they’re going to do two years or six years? I’m sorry. If they can’t even get a budget for the government beyond November, do I really believe that they will think two or six years down the road? No. They’ll fund next year, and that will be it. That’s my belief, as sad as that is.

RODRIGUEZ:  For the last two years, there has been a lot of wishful anticipation for some of this. The federal highway tax on gasoline that was put in the 70’s – that got thrown into the general fund by the Clinton administration. And then it was kept there by the Bush administration.  So as far as construction, which is sparked by federal funding, I just don’t see that. It would be great if it happened, but I wouldn’t delay decisions waiting for that. Washington is broken. It doesn’t work for us. We’re just regular folks trying to make a living, right? The folks in Washington are motivated by dissention, disagreement and failure to perform. If any of those people employees, you’d fire them, because they’re not competent. Regardless of whether it is Democratic or Republican, I don’t have a great anticipation of something coming out if that bill that would benefit my company for my customers.

HEINEMANN: As it pertains to the highway bill, I am running out of hope. You can’t fund everybody. And unfortunately, with some of the state of the roads, they are beyond repair. Unfortunately, probably for us, the best thing we can do is lobby differently.  Most of the public doesn’t get that. They don’t understand that, once the potholes show up, we are too late. We are not talking about just patching. We’re talking about replacement. So it is a tough nut to crack.

KUEHL: It’s about driving the economy. If we could get that funded, it could help the economy get started again.

ALEXANDER: This is an absolute necessary item that we have to address before the economy is going to turn back around. Like everything, it’s become so political. No matter where you look, the municipalities, local, state or federal government, there is just no money. And to me, being biased as a producer, the gas tax is the least painful and easier solution. This gets brought up every time this comes up. But when we buy a gallon of gas, I don’t know what the price is out there right now, whether it is $3.29, $4.00 or $3.70. But a couple cents isn’t really going to make any difference to me, and I don’t think the general public will recognize that, either. There is a tremendous way, in terms of getting the funds we need to get our infrastructure back to where it should be.

KRAUSE: So Alexander, from an NSSGA standpoint, is there something new, unique or different that we’re trying to promote this time or marketing differently?

ALEXANDER: I wish I could say yes. But for any of you that are on any of the links or get any of the emails from NSSGA, it is always the same thing. Call your congressman.
REDDIN: For the last 25 years, same thing.

KRAUSE:  And again, I know it is important to call our congressman and all that. But somehow we’ve got a change the conversation, because where we are today I don’t think its going to cut it.

RICHESSON: Frac sand is one of the hot topics in the aggregates industry. Oil and gas companies claim the practice of fracking is safe, while homeowners on the front lines are up in arms. In the meantime, some producers are cashing in on the demand for frac sand. Is this affecting your business, and how do you think the controversy will play out?

RODRIGUEZ:  Frac sand has been around for a long, long time. It’s something that received a lot of attention here recently from the energy industry. My impression is that most producers today cannot make a frac sand properly. First of all, there is not a uniform spec for frac sand. It can be interpreted locally. It can be something that some guy want or some company wants. And the problem with making frac sand is that the particles have got to be very, very polished and have to be very, very uniform in strength. Because you put tremendous pressure when you pump it, when you pump it down a hole, and you can’t have the particles fail. So one of the issues then is not every type of aggregate deposit can be sued for making frac sand. Only certain materials that qualify to make that specification or withstand the strength that’s required. So there is still a lot of to be learned about frac sand.

CARLISLE: I have no doubt that some of the things that you’re reading and hearing about, by and large, have everything to do with people not really understanding it.

RODRIGUEZ: There is uniformity to the spec. In Canada, they make it in three or four different sizes. They are very narrow, like 40 to 60 mesh, 60 to 80 mesh. And then it has to be permeable to that material can flow through it. But it has to also have durability. So it has to do lots of things. And I don’t think the science is complete yet. I don’t think there has been enough work done there.

KUEHL:  There is an engineer somewhere in the process that says this is the recipe that we need for this well. So the different size fraction that we see – because obviously we are interested in this quite heavily – 30, 70 and 140 has been the primary size for frac sand when you’re screening it. But because it’s a recipe, there are not controls. Nobody knows really what they are pumping down the wells. And because nobody knows what they’re pumping down the wells, then you can have the chemicals, you can have the rest of the stuff you get down there. And that’s the groundwater kind of issues that start getting discussed. The controversy will get resolved, it you just follow the money. There is a lot of money in this. The regulations will get through this, and it will probably end up safer. But how long it takes us to get there, I do not know.

RODRIGUEZ: When somebody says that we’re going to use 70 to 140, and it’s the engineer on the project, he has no clue what an aggregate processor or a mining company has to go through to get 70 by 140 with high strength. You mine a hundred tons then you’ll end up with five tons of frac sand .One of the problems is a lack of understanding in the oil and gas industry as to what’s required when you’re making this stuff.

KUEHL: I couldn’t agree more. We have one particular account that’s driven by oil and gas people.  They’re not crushing and screening people, they’re oil and gas people. And they really, truly have a hard time understanding what’s going on.

REDDIN: The ancillary benefit of the industry is the pads themselves, where the wells are, consume a good deal of aggregate. And then they are often down in the rural areas where roads need to be developed to get there, even maybe sand and gravel roads. So there is a tremendous amount of aggregate that’s going into this business.



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