More government spending fuels concrete demand into the future.
It seems like every few months there is another spending bill working through Congress. No matter where you stand on the wisdom of this spending, it is going to be great for concrete producers. We are now only a few months away from the time when the first $1-trillion dollar infrastructure bill of 2021 will start paying for projects. In August of 2022 the environmentally based “inflation reduction act” was signed, flowing more funding towards concrete.
After analyzing the 2021 infrastructure bill the Moody’s Investors Service reported: “…we project total U.S. construction spending ($1.5 trillion) to grow 5.0% in 2022 and 5.5% in 2023.” “Aggregate companies would be one of the beneficiaries of increased public infrastructure investment.” “Price and volume of aggregates (46% to ready-mix production) is currently projected to increase by 3% per year.” “A sizable infrastructure bill could see price and volume increase an additional 2%. Cement and ready-mix producers are expected to see gains, as well.”
Ready Mix Concrete (RMC) production takes 46% of the aggregates produced each year, so RMC usage is estimated to be over 440 million tons this year. Cement is another ingredient in concrete and 75% of U.S. cement production is used to make RMC each year. Just the government spending from the 2021 bill is projected to consume an additional 46 million metric tons of cement powder with 35 million tons going to make concrete. Because ready-mixed concrete is the foundational materials used to support our infrastructure, this reporting is very bullish for national concrete spending. Even with some economic headwinds and supply chain challenges, we see a rosy future for Cart-Away concrete investors. The Cart-Away self-delivery business model is poised to profit from the surge in small concrete projects associated with this huge spending program.
The following are a list of the categories with major commitments from just the 2021 government package:
- Roads and bridges: $110 billion – Millions of yards of Ready-mix Concrete
- Airports and ports: $42 billion – Millions of yards of Ready-mix Concrete
- Rail: $66 billion – Hundreds of thousand yards of Ready-mix Concrete
- Road safety: $11 billion – Hundreds of thousand yards of Ready-mix Concrete
- Reconnecting communities: $1 billion – Hundreds of thousand yards of Ready-mix Concrete
- Power grid infrastructure: $73 billion – Millions of yards of Ready-mix Concrete
- Resilience and Western water storage: $46 billion – Millions of yards of Ready-mix Concrete
The 2022 spending package gives even more for concrete
Because concrete is the most consumed product of the built environment, we see the next round of spending as more Christmas for Concrete. There may be some economic challenges for many sectors due to inflation and recession but concrete has more Santa Clause deliveries from the government.
The 2022 Inflation Reduction Act is highly slanted toward “green” initiatives and there will be even move concrete needed. There are incentives to promote upgrading buildings and dwellings to be more energy efficient. Incentives that will have an impact on the infrastructure for electric transportation. There are provisions for improving the water infrastructure in drought prone regions. The more building that is funded, the more RMC is needed to support the work. The more government projects, the more ready-mix needed. The more concrete needed the more it is Christmas for Cart-Away.