2018 OTR Industry Forecast 63 rd Off-the-Road Conference Sawgrass Marriott Ponte Vedra, FL

Transcription

1 2018 OTR Industry Forecast 63 rd Off-the-Road Conference Sawgrass Marriott Ponte Vedra, FL February 22, 2018 Kevin Rohlwing Senior Vice President of Training

2 Equipment Fleet Size Earthmoving Equipment Reduce 11% Increase 14% Maintain 75% Source: American Road & Transportation Builders Association Market Forecast 2018

3 Equipment Fleet Size Paving & Compaction Equipment Reduce 3% Increase 12% Maintain 85% Source: American Road & Transportation Builders Association Market Forecast 2018

4 Equipment Fleet Size Other Equipment Increase 21% Reduce 10% Maintain 69% Source: American Road & Transportation Builders Association Market Forecast 2018

5 Equipment Fleet Condition 70 Percentage of Respondents w/equipment in Need of Repair or Replacement Survey 2015 Survey 2016 Survey 2017 Survey Earthmoving Paving/Compaction Other Total Source: American Road & Transportation Builders Association Market Forecast 2018

6 Construction

7 U.S. Construction U.S. Total Residential Construction Starts $500 $400 $ Billions USD $300 $200 $100 Forecast $ Year Source: ConstructConnect/Oxford Economics

8 U.S. Construction Residential Buildings Single-Family 9% 9% 7% 5% 3% Multi-Family 15% 7% 5% 4% 3% Improvements 10% 14% 6% 3% 1% Total Residential Buildings 10% 10% 7% 4% 2% Source: ConstructConnect/Oxford Economics Residential Buildings Single-Family 9% 9% 7% 5% 3% Multi-Family 15% 7% 5% 4% 3% Improvements 10% 14% 6% 3% 1% Total Residential Buildings 10% 10% 7% 4% 2% Source: FMI Construction Outlook

9 U.S. Construction $35 U.S. Hotel/Motel Construction Starts $30 $ Billions USD $25 $20 $15 $10 Forecast $5 $ Source: ConstructConnect/Oxford Economics Lodging 23% 5% 5% 3% 2% Source: FMI Construction Outlook

10 U.S. Construction $15 U.S. Sports Stadium & Convention Center Construction Starts $12 $ Billions USD $9 $6 $3 Forecast $ Year Source: ConstructConnect/Oxford Economics

11 U.S. Construction $50 U.S. Retail/Shopping Construction Starts $40 $ Billions USD $30 $20 $10 Forecast $ Year Source: ConstructConnect/Oxford Economics

12 U.S. Construction U.S. Warehouse Construction Starts $24 $20 $ Billions USD $16 $12 $8 $4 Forecast $ Year Source: ConstructConnect/Oxford Economics

13 U.S. Construction $35 U.S. Private Office Construction Starts $28 $ Billions USD $21 $14 Forecast $7 $ Year Source: ConstructConnect/Oxford Economics

14 U.S. Construction $40 U.S. Industrial/Manufacturing Construction Starts $35 $30 $ Billions USD $25 $20 $15 $10 Forecast $5 $ Year Source: ConstructConnect/Oxford Economics

15 U.S. Construction $30 U.S. Hospital & Clinic Construction Starts $25 $ Billions USD $20 $15 $10 Forecast $5 $ Year Source: ConstructConnect/Oxford Economics

16 U.S. Construction U.S. Total Educational Construction Starts $100 $80 $ Billions USD $60 $40 $20 $ Year Source: ConstructConnect/Oxford Economics

17 U.S. Construction U.S. Roadwork Construction Starts $100 $80 $ Billions USD $60 $40 $20 Forecast $ Year Source: ConstructConnect/Oxford Economics

18 U.S. Construction U.S. Civil (e.g., Power, etc.) Construction Starts $36 $30 $ Billions USD $24 $18 $12 $6 Forecast $ Year Source: ConstructConnect/Oxford Economics

19 U.S. Construction U.S. Grand Total Construction Starts $1,000 $800 $ Billions USD $600 $400 Forecast $200 $ Year Source: ConstructConnect/Oxford Economics

20 Construction Forecast by State Northeast 3% 3% Connecticut 19% 4% Delaware 4% 6% Maine 3% 6% Maryland -5% 8% Massachusetts 3% 1% New Hampshire 0% 14% New Jersey 1% 5% New York 1% -3% Pennsylvania 10% 3% Rhode Island 17% 2% Vermont 3% 4% Virginia 3% 10% West Virginia 23% 16% South 3% 6% Alabama 2% 9% Arkansas 5% 5% Florida 10% 3% Georgia 2% 7% Louisiana -6% 0% Mississippi 6% 13% North Carolina 1% 6% Oklahoma 9% 9% South Carolina 1% 5% Tennessee -1% 2% Texas 3% 10% Source: Oldcastle Business Intelligence

21 Construction Forecast by State Midwest 1% 4% Illinois 9% 5% Indiana 4% 10% Iowa -4% 1% Kansas -8% 12% Kentucky -9% 13% Michigan 3% 3% Minnesota 0% 2% Missouri 0% 4% Nebraska 11% 0% North Dakota -21% 4% Ohio 8% 0% South Dakota -5% -1% Wisconsin 0% 0% West 8% 5% Alaska 9% 1% Arizona 6% 9% California 14% 3% Colorado 8% 5% Hawaii -9% 30% Idaho 4% 10% Montana -5% 8% Nevada -2% 16% New Mexico 5% 14% Oregon -1% 2% Utah 0% 3% Washington 5% 1% Wyoming -6% 12% Source: Oldcastle Business Intelligence

22 Construction Forecast by State Source: Oldcastle Business Intelligence

23 Construction Forecast by Metro Area Northeast Baltimore, MD -6% 1% Boston, MA 6% -1% Buffalo, NY 2% 9% Hartford, CT 4% 16% New York, NY -3% -2% Philadelphia, PA 15% -3% Pittsburgh, PA 19% -3% Providence, RI 14% 2% Richmond, VA 8% 12% Virginia Beach, VA 4% 13% Washington, DC 0% 7% South - San Antonio 10% 13% South - Tampa, FL -4% 9% South - Tulsa, OK 10% 12% South Atlanta, GA 4% 6% Austin, TX 2% 7% Birmingham, AL -10% 13% Charleston, SC -12% 4% Charlotte, NC 5% 4% Dallas, TX 2% 10% Houston, TX 1% 14% Jacksonville, FL 3% 4% Miami, FL 18% 0% Nashville, TN -4% -5% New Orleans, LA 38% -14% Oklahoma City, OK -3% 17% Orlando, FL 7% -5% Raleigh, NC -10% 5% Source: Oldcastle Business Intelligence

24 Construction Forecast by Metro Area Midwest Chicago, IL 11% 2% Cincinnati, OH -4% 2% Cleveland, OH -3% 9% Columbus, OH 0% 3% Des Moines, IA -1% 2% Detroit, MI 7% -1% Indianapolis, IN 1% 12% Kansas City, MO -7% 4% Minneapolis, MN -8% 1% St. Louis, MO 4% 0% West Denver, CO 2% 1% Las Vegas, NV -2% 15% Los Angeles, CA 15% -7% Phoenix, AZ 5% 6% Portland, OR 4% 4% Riverside, CA 18% 10% Sacramento, CA 22% 2% Salt Lake City, UT 13% -4% San Diego, CA 0% 9% San Francisco, CA 28% -2% San Jose, CA 19% 5% Seattle, WA 4% -2% Source: Oldcastle Business Intelligence

25 Construction Forecast Segment Residential 6% 6% Single-Family 9% 9% Multi-Family 1% -1% Non-Building 4% 4% Roads & Bridges 5% 6% Infrastructure 3% 3% Non-Residential 2% 4% Commercial 1% 2% Hotels 8% -2% Office 5% 6% Retail -8% 1% Education 5% 6% Healthcare 1% 5% Public Buildings 2% 6% Industrial 0% 4% Other Non-Residential 2% 0% Source: Oldcastle Business Intelligence

26 Construction Forecast Segment Residential 10% 7% Single-Family 9% 7% Multi-Family 7% 5% Non-Building -4% 2% Roads & Bridges -1% 2% Power -3% 4% Sewage & Waste Disposal -11% -4% Water Supply -8% -3% Conservation -6% 3% Non-Residential 2% 5% Commercial 10% 7% Lodging 5% 5% Office 9% 9% Education -2% 3% Healthcare 1% 3% Religious -6% 1% Public Safety -1% 1% Amusement/Recreation 4% 4% Transportation 1% 2% Communication 2% 3% Manufacturing -7% 6% Source: FMI Construction Outlook

27 U.S. Construction Forecast Residential markets are forecasted to have the most growth. General consensus on residential growth for single family housing in the area of 6-7%. Lack of consensus on multi-family housing ranging from -1% to 5%. Non-building forecasted for a slower rate of growth ranging from 2-4%.

28 U.S. Construction Forecast Warehouse and mixed-use buildings (living units above retail) expected to increase. Lack of consensus on hotel construction. Stadiums and tax-funded projects expected to decrease without funding. Shortage of skilled labor, especially craft workers (carpenters, electricians, brick masons, plumbers), poses the biggest risk to long-term growth.

29 Canada Construction Forecast Residential 1% 2% Non-Residential 1% 6% Non-Building -2% 7% Total Construction -1% 4% Canada Real GDP Source: Oldcastle Business Intelligence Alberta, British Columbia and Ontario are expected to perform better than national GDP. Source: IMF World Economic Outlook

30 Canadian Construction Employment Residential Non-Residential Total Total Employment -3% 1% 2% 2% -0.3% 1.5% Newfoundland/Labrador -13% 10% -20% 7% -18.6% 7.5% Nova Scotia -6% -4% -3% 5% -4.5% -0.2% New Brunswick -3% -1% -7% 2% -4.9% 0.6% Prince Edward Island -8% 7% 8% 8% -0.6% 7.4% Quebec -6% -2% -1% 7% -3.4% 2.8% Ontario 1% -1% 6% 1% 3.4% 0.3% Manitoba -5% 0% -9% 2% -7.7% 1.3% Saskatchewan 1% 24% -5% -3% -2.7% 5.9% Alberta 5% 1% -4% 8% -0.6% 4.9% British Columbia -13% 3% 20% -7% 0.1% -1.4% Source: Statistics Canada, BuildForce Canada

31 Canada Construction Forecast Residential Concerns about possible housing bubble in Toronto and Vancouver. Non-Residential Benefitting from transition from natural resources economy to a high-tech, service-based economy. Non-Building Government investing $35B into a infrastructure bank for public transit and green projects.

32 Aggregates

33 Aggregates May 2017 Source: SC-Market Analytics

34 Aggregates May 2017 Source: SC-Market Analytics

35 Aggregates December 2017 Source: SC-Market Analytics

36 The Wall 1,600 miles of concrete wall or 44 million tons of aggregate. Additional 2% of total aggregate consumption for the U.S. Source: SC-Market Analytics

37 Aggregates 85% - Producers who have an optimistic outlook for the aggregate industry in % - Producers whose construction material sales jumped more than 10 percent in % - Producers who expect their 2018 construction material sales to jump more than 10 percent in % - Producers who believe the aggregate industry can return to pre-recession sales levels of a decade ago. Source: Pit & Quarry 2017 State of the Industry Survey

38 Aggregates Source: Pit & Quarry 2017 State of the Industry Survey

39 Transportation Construction Total Market Activity in Billions (2017 USD) e 2018f 2019f 2020f Public Highway & Bridge $93.2 $93.7 $87.3 $89.4 $91.2 $93.2 Private Highway & Bridge $56.5 $60.8 $62.4 $63.3 $65.5 $67.0 Mass Transit & Rail $21.0 $19.3 $20.3 $21.3 $22.0 $22.3 Ports & Waterway $2.4 $2.0 $1.8 $1.8 $1.9 $2.0 Airport Runways & Terminals $13.7 $14.4 $15.3 $17.5 $19.1 $20.6 Public Highway/Bridge Support $55.0 $63.9 $59.9 $61.8 $63.5 $65.3 Total Construction $186.8 $190.2 $187.1 $193.3 $199.7 $205.0 Total Support $55.0 $63.9 $59.9 $61.8 $63.5 $65.3 Total Transport Construction $241.8 $254.2 $247.1 $255.0 $263.2 $ % -3% +3% +3% +3% Source: American Road & Transportation Builders Association Market Forecast 2018

40 Major Subway & Light Rail Projects Expected to open after 2019 East Side Access New York, NY ($10.8 billion) Phase 1 of Honolulu Rail Transit Honolulu, HI ($6.6 billion) Phase 1 of Purple Line Extension Los Angeles, CA ($2.8 billion) East Link Light Rail Seattle, WA ($2.8 billion) Phase 2 of the Silver Line Washington, DC ($2.8 billion) Source: American Road & Transportation Builders Association Market Forecast 2018

41 U.S. Rail Freight 3000 Total Tonnage Total U.S Rail Freight Tonnage Source: Freight Analysis Framework

42 U.S. Airport Capacity By 2027, traffic at U.S. airports will increase by 26%. The FAA has identified 5 airports in 3 metro areas that need additional capacity by 2020: Atlanta (ATL); New York (JFK, EWR, LGA); and Philadelphia (PHL). Demand consistently exceeds capacity at numerous major airports: JFK/EWR/LGA; San Francisco (SFO); Chicago O Hare (ORD) and Los Angeles (LAX). Domestic air cargo revenue per ton miles increased by 1.8% in 2017 with 2.3% increases forecasted for the next 5 years.

43 Aggregates Forecast Experts were forecasting a slight drop in aggregate demand in 2018 when compared to Nonbuilding is the biggest driver of aggregate and depends on federal, state and local funding. Infrastructure spending bill is a source of optimism, but the projected labor force shortage (mechanics, welders, fabricators) has aggregate producers worried about meeting the increased demand.

44 Mining

45 Coal Production

46 Coal Production U.S. Energy Information Administration (EIA) estimates that coal production will decrease by 2% in The Appalachia region will see the biggest decrease followed by the Western region as the result of projected decline in coal exports. EIA projects another 2% decrease in coal production for 2019.

47 Base Metals NAB Forecasts Quarterly Average Terms Forecasts USD/tonne Aluminum Copper Lead Nickel Zinc Source: Thomson Reuters; NAB Economics

48 Base Metals FocusEconomics Consensus Forecast Commodities Report Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Aluminum USD/tonne Copper USD/tonne Lead USD/tonne Nickel USD/tonne Tin USD/tonne Zinc USD/tonne Iron Ore USD/tonne Source: FocusEconomics

49 Base Metal Forecast v. Actual Forecast Actual NAB Q1 18 FE Q1 18 Jul 2017 Jan 2018 Aluminum USD/tonne Copper USD/tonne Lead USD/tonne Nickel USD/tonne Tin USD/tonne Zinc USD/tonne Iron Ore USD/tonne Source: Index Mundi

50 Nickel NICKEL PRICES Nickel Prices USD/tonne Source: Index Mundi

51 Base Metals Forecast

52 Precious Metals Spot ( ) Q1 17 Q4 17 Q4 18 Gold USD/troy oz $1,200 $1,204 $1,204 $1,253 Silver USD/troy oz $16.9 $17.0 $17.1 $18.1 Palladium USD/troy oz $752 $728 $737 $800 Platinum USD/troy oz $942 $978 $1,029 $1,100 Source: FocusEconomics

53 Gold GOLD Gold USD/troy oz Source: Index Mundi

54 Gold Weak U.S. Dollar has pushed gold prices above $1,300 an ounce. Zacks Investment Research is projecting earnings growth for: Barrick Gold (16.89% in 2018, 11.01% in 2019) Franco-Nevada Corp (6.81% in 2018, 14.40% in 2019) Sandstorm Gold (90.91% in 2018, 100% in 2019). Zacks projects earnings growth for the entire gold sector throughout 2018: Q1 18.9% Q2 14.8% Q3 8.7% Q4 5.6%.

55 Gold v. USD Gold USD Sources: Index Mundi & Bloomberg Markets

56 Silver SILVER Silver USD troy/oz Source: Index Mundi

57 Palladium PALLADIUM USD TROY/OZ Palladium USD troy/oz Source: APMEX, Inc.

58 Platinum PLATINUM Platinum USD troy/oz

59 Precious Metal Forecast v. Actual Forecast Actual Forecast Actual Q4 17 Jul 2017 Q4-18 Jan 2018 Gold USD/troy oz $1,204 $1,270 $1,253 $1,342 Silver USD/troy oz $17.10 $16.88 $18.10 $17.35 Palladium USD/troy oz $737 $890 $800 $1,032 Platinum USD/troy oz $1,029 $941 $1,100 $936 Sources: FocusEconomics & APMEX

60 Mining Forecast Mining projections and forecasts for 2018 generally called for price drops. Actual performance in base metal prices since the beginning of the year indicate pricing growth for most base metals. Australia is forecasting iron ore prices to average $51/tonne based rising global supply and moderating demand from China. UBS and Citi are forecasting iron ore to average $64 a tonne.

61 Mining Forecast If the US Dollar continues to fall, gold prices are projected to continue rising. Silver projections are all over the place but the consensus appears to be stable prices for Both palladium and platinum are expected to outperform projections for None of the precious metal projections indicate falling prices in 2018.

62 Summary Construction continues to be the driving force behind any growth in the OTR industry. Aggregate demand was expected to fall in 2018 but optimism remains high, transportation construction is forecasted to increase and any movement on infrastructure or The Wall will lead to recovery. The general consensus in mining is optimism and recovery, but we are still making up for lost ground.

63 Summary Thank You! Kevin Rohlwing Senior Vice President of Training