January 1, 2012

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Construction

Utah Business Staff

January 1, 2012

So as we are progressing, we are not training the trades people. We are struggling with labor because the market does not give us enough to go out and pay any more and still be viable, and our masons are getting older and nobody wants to come into the trade. If you cannot get enough wages to buy a vehicle, pay for a house and feed your family, why would you want to be in it?

KLEIN: I agree. Trying to pay somebody $13, $14, $15 an hour maximum—they don’t want to do that. But the immigration issue is another issue. Somebody has got to figure that out. It’s going to hurt all of us and it’s going to continue to hurt us, and it’s a divisive issue as well.

Let’s circle back and talk about materials—pavement, oil, etc. What are you seeing on commodities?

MORGAN: I deal with all the producers that are dealing with the oil companies and fighting that battle. From what I see in dealing with all of the ones that supply hot mix asphalt here in the valley, everybody is struggling. Everybody has finally found the bottom and how cheap we can produce this stuff and still sell it and use it internally. So I don’t see it getting any cheaper. If anything, it’s going to have to get more expensive. A lot of us as contractors and suppliers are a little bit Las Vegas gamblers in that we hope we can buy this liquid next year because we’ve got commitments that go into next year at certain prices. And the contracts with oil companies—we hope that they are going to supply it.

I don’t see any more relief in pricing of oil, hot mix asphalt. If anything, it’s going to go up. The supply end seems to have stabilized but that could change tomorrow. It’s a real volatile issue and a volatile product. It’s a daily battle dealing with supply, dealing with pricing, and there is no end in sight on that.

VAN DER STAPPEN: We really have not seen any price increases for the last three years. Like Tom, we do expect when this thing takes off, it’s going to go. And these guys have been holding their costs back just so they can get it sold. I drive by a lot of these gravel pits and I don’t see hardly anybody in there anymore. They are just empty and I know they are doing everything they can to get something out the door. Our suppliers are trying to make commitments into next year for us, and I’m sure they are taking a gamble too. We’re just hanging on, and that is what they are doing.

Are you seeing differences in municipal-type work or parking lot, custom-type work, specialty work versus mainline type paving?

VAN DER STAPPEN: The majority of our work this year has been municipal work. There really isn’t any money in it. I worry when the mainline paving runs out and these heavy highway companies start working in on the market also.

KILGORE: It’s so volatile right now. You don’t know what is going to come. You start talking about the commodities—those are pretty flat today. But when you have a supplier in Wyoming that is basically building a refinery and trying to figure out what they are going to supply and what they are not going to supply, it leaves it pretty openended.

When you quote a UDOT job in today’s market, you’ve got a 200 to 250-dollar swing from the top price down to the low price, and that’s a big swing. That is 33 percent, roughly.

So who knows what is going to happen? The times right now for oil are scary. What is the barrel doing? Because asphalt is going to track with what the barrel is doing. Buying asphalt today is almost like going to the gas pump. You pay when you get there.

CLYDE: It’s very volatile, probably the most volatile of anything that we deal with. Cement companies are very stable. They give you plenty of time for price increases. They will let you know ahead of time, plan with your customers. This asphalt—how many things are everybody paying for that the day you pick it up, they take it out of your bank account? They want it paid immediately and they don’t want you sending them a check. It really hurts your cash flow. They are not willing to commit on price or quantity.

We have a major supplier who just killed all of us here a few years ago, and I know it cost us a couple million dollars. And then they decided to get back in the asphalt business, and we all crawled right back to them because there are so few suppliers and it’s really a tough area to be in.

How is the federal government impacting your business? We’ve touched on the highway bill. Are you optimistic that they are going to get something done on that?

ALBRECHT: At this point, there is actually talk about it. It’s a nonpartisan issue. They’ve just got to figure out how to fund it, basically. And it’s not one side or the other; they just don’t want to come together. But finally before Halloween there was some traction. There was some movement and I’m optimistic that it will get done. I don’t know what it will look like.

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