A sharp decline in housing construction in 2007 provoked a steep drop in revenue
Los Angeles, CA (PRWEB) October 25, 2012
The Sand and Gravel Mining industry principally mines and undertakes basic processing of sand and gravel used for construction aggregate and industrial applications, such as road building, landscaping, snow and ice control and petroleum extraction. The industry also undertakes the extraction and primary processing of clay and refractory products for use in downstream manufacturing applications. The volume of domestic production of sand and gravel is expected to amount to 879.4 million metric tons in 2012, declining at an average annual rate of 7.2% over the five years to 2012. According to IBISWorld industry analyst Agiimaa Kruchkin, “this decline in production is largely due to the collapse and continued weakness of US construction markets.” While revenue is expected to grow 8.6% in 2012 to total $8.4 billion, it remains far below the record revenue of $9.9 billion generated in 2006. The slump in downstream construction markets from 2007 through 2009 hurt the demand for construction aggregates and materials for building products. Consequently, weak demand resulted in a steep revenue drop of 22.4% in 2009, following an 11.1% fall in 2008. Despite the recovery from 2010 to 2012, industry revenue is expected to have declined at an annualized rate of 2.7% over the five years to 2012.
The deterioration of housing construction since 2007 reduced demand for a range of building materials provided by the Sand and Gravel Mining industry. Solid growth conditions in the infrastructure and nonresidential building markets partly buoyed the demand for construction materials in the latter part of the past five years. However, demand from these markets could not sufficiently offset the decline in the housing market and the downstream manufacturing industries. As a result, the total number of industry enterprises has contracted over the past five years. “To combat limited demand, several medium- to large-scale players have been acquiring other competitors to strengthen their positions in regional markets,” says Kruchkin. This heightened merger and acquisition activity, especially among major players like CRH PLC and HeidelbergCement AG, has caused led to higher industry concentration. Nonetheless, the majority of the industry continues to be made up of smaller firms, as it is difficult to acquire the vast amounts of capital required to set up a network of facilities serving multiple geographic markets necessary to capture a large market share.
Over the five years to 2017, the demand for clay and refractory materials is projected to continue deteriorating in several downstream manufacturing industries. However, this decline will be offset by stronger demand in the downstream housing construction market in the latter part of the five-year period. In addition, anticipated growth in public sector investment into highway and bridge construction markets will provide an additional market from which companies can source revenue. As disposable incomes return to growth on the back of an improving US economy, private spending on home improvements is also expected to strengthen, enhancing the industry’s financial performance. With these positive trends forecast to outweigh any declines, industry revenue is forecast to grow strongly in the next five years. For more information, visit IBISWorld’s Sand & Gravel Mining in the US industry report page.
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IBISWorld industry Report Key Topics
This industry comprises firms involved in mining and quarrying sand (construction and industrial) and gravel, along with clays, ceramic and refractory minerals. Industry activity may include the beneficiation of these minerals by washing, screening and otherwise preparing the mined sand, gravel and clays.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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