Construction fleets should be busy in 2007

Jan. 1, 2007
BASED ON initial indications, 2007 could be a tough year for the trucking industry as a whole.

BASED ON initial indications, 2007 could be a tough year for the trucking industry as a whole. Many chemical haulers report a very soft start to the year, with freight levels well below last year at this time. Dry freight carriers seem especially hard hit right now.

On the other hand, there are the fleets that specialize in serving the construction industry. Our annual forecast of construction hauling suggests that these fleets should stay busy throughout 2007 hauling cement, fly ash, lime, asphalt, sand, and various construction-related chemicals.

New home building appears to be the only serious negative in the outlook. Housing starts fell into a steep decline in the second half of 2006, and many economists believed initially that the slump would continue well into 2007. However, there are signs that the worst of the downturn may be over for the housing market. That would be very good, indeed.

Even if the housing market remains soft, other construction sectors are poised to take up the slack. Highway and bridge construction spending grew by about 16% in 2006, the largest increase since 1984, according to the American Road and Transportation Builders Association. Spending on those projects could grow by about 2% during 2007.

Congress will be the crucial factor in determining total spending on road and bridge construction in 2007. There is a concern that the new Democrat leaders could propose a continuing resolution for highway funding that will lock in the 2006 spending levels until at least 2008.

Airport construction projects grew by around 18% in 2006. One of the biggest was a $90-million contract to replace 14,500 feet of runway and taxiway at Hartsfield-Jackson Atlanta International Airport. StarTrans Inc, the lead cement hauler in that project, is profiled in this issue of Bulk Transporter. More money will be available for new runways and other infrastructure in 2007.

Subway and light rail construction is expected to remain flat through 2007, but Democrats in Congress generally are seen as mass transit advocates, and they may push a larger number of these projects. Freight rail construction spending was up more than 20% in 2006. Freight levels will determine the amount of construction spending in this sector in 2007.

Commercial construction posted solid performance during 2006, and 2007 should be another good year. In fact, some regions of the United States report that commercial construction could grow by as much as 15%. During 2006, store construction and new hotel projects were up substantially. Office construction also strengthened.

Industrial construction also may see growth in certain areas. For instance, PACCAR Inc just announced plans to build a new $400-million powertrain manufacturing and assembly plant in the southeastern United States. New construction projects for biofuels are being announced almost daily.

Considering all of these factors, economists believe US construction activity will be flat or will grow modestly during 2007. Even if it is flat, that is a lot of loads of cement, asphalt, and other construction materials.