The quarrying quandary

It’s been a busy few years for the nation’s quarry operators as they have worked hard to satisfy generally strong demand from the civil construction, commercial building and residential building sectors.Ron Kerr, chief executive of Victoria’s Construction Materials Processors Association, said the current downturn had followed seven or eight years of sustained growth.“The tonnages have been accelerating every year along with demand and clearly that wasn’t sustainable,” Kerr said. “Sometimes, reality has to set in.”Kerr said regional Victoria had been quiet for a few years already and some members continued to struggle. In the Melbourne metropolitan market there were clear indications of a slowdown.“There are more people pricing jobs than there were in the past – that must be an indication of a contraction,” he said.Kerr said one reason for the increased competition for contracts was that the major quarrying companies were now quoting on smaller jobs than before.Cement Concretes and Aggregates Australia chief executive Ken Slattery said the big companies were already tightening their belts.“Certainly a few of the majors have stopped spending capital at this point and have stopped recruitment,” Slattery told Contractor. “The industry has actually coped with the very high level of demand quite well and we are really not looking forward to a downturn at all.“The real concern a lot of the major companies are having is their access to finance. A couple of the big players in Australia have recently been the subject of acquisitions … and their parent companies are very heavily geared, so they are not all comfortable with the prospect of seeing the order book turn down.”CMPA’s Kerr said some businesses at the smaller end of the scale might take a more positive approach to a slump in orders.“In a family business you will invest in a plant upgrade – it is a time to carry out works that you cannot otherwise do when you’re flat out supplying a market,” he said. “ A family company will tend to look at it and say ‘well, we have to keep these people employed so we’ll put some money into a new conveyor system or screen, do some overburden stripping or rehabilitation work, and use the available capital and labour.”Quarrying companies, like those in the broader civil construction sector, are hoping that ongoing federal, state and local infrastructure work will help insulate them from the worst of the downturn.CCAA Queensland executive officer Ken Gluch said a lot of projects, particularly in the state’s booming southeast, were well underway and couldn’t be stopped.“While housing is down a bit, and the mines are going through some hard times, I suspect that the government infrastructure program will soften some of the impacts,” Gluch said. “Hopefully it shouldn’t be too bad a year for the industry.”CCAA’s Slattery said infrastructure work had masked over the continuing decline in the housing sector. “Our concern is there’s not an enormous amount of stuff sitting in the infrastructure pipeline beyond the work that’s currently being done,” he said.Slattery said the commercial building sector was still doing fairly well, resulting in steady demand for concrete aggregates, but he had concerns for the sector in the longer term because of the problems developers were now facing in financing new projects. He said there were apartment, mid and high-rise commercial, and smaller shopping centre developments that had been planned for some time but couldn’t proceed because finance was not available.While the downturn is causing some concern in the industry, other trends are more welcome. The loosening of the labour market, for example, will make it easier to find and retain skilled workers. Slattery said the softening in the mining sector would help slow the talent drain. “But it hasn’t been a killer problem for us around the country generally,” he said. “In WA it’s always been a problem, because you train up drivers and as soon as they are competent then they’re gone.”Slattery said the recent easing of fuel prices had also helped, especially in the Sydney market where average haul distances were 100-150 kilometres.Kerr also welcomed the end of the fuel price spike, and said the federal government’s 10% investment allowance was more good news. Kerr said he advised his members to help themselves through the tough times by keeping a tight rein on credit. “Credit is one of those issues that gets swept aside and people, particularly in family businesses, begin to think they are banks and they extend terms out,” he said.

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