Despite the widespread economic havoc caused by the COVID-19 pandemic, more than a few of the tank truck carriers serving the construction industry are staying busy. The loads keep coming even as the US construction sector braces for steep declines in public and private construction spending.
Just days before a number of states began reopening their economies after many weeks of quarantine, Bulk Transporter spoke with executives at several tank truck carriers that have sizable construction hauling operations. Fleet executives discussed the impact of COVID-19 on their operations and the challenges and opportunities their operations have encountered in the current market.
Jack Schwerman, president of Milwaukee, Wisconsin-based Tankstar USA, said that 2020 started strong after a very solid 2019. Then the COVID-19 pandemic hit, and every week since the beginning of March has been slower than the previous week.
“We’re running at about 70% of capacity right now,” he says. “We’re seeing the biggest slowdowns in the states with the highest number of COVID cases. Pennsylvania is among the states that are still shut down. Other markets, like Atlanta, Georgia, are still running strong for cement hauling.
“Florida has been very slow. The state closed all of the building permit offices as soon as the coronavirus outbreak became an issue. No new permits are being issued for construction projects.
“Texas is a bit slow. We’re most active there in the region that runs from San Antonio to Midlothian. That’s the limestone corridor where the cement plants are located. Every week seems to be getting a little slower.”
Economic rebound
Construction hauling accounts for about 35% of Tankstar USA’s activity, and cement is the primary construction-related cargo. Across its operation, Tankstar USA runs 400 tractors and 650 trailers and serves customers across the eastern half of the United States, with a concentration in Texas, Alabama, Georgia, South Carolina, Florida, Tennessee, Virginia, Maryland, Delaware, Pennsylvania, New Jersey, and Rhode Island.
Schwerman says the outlook for the rest of the year depends on how quickly the US economy rebounds from the COVID-19 shutdown. “We’re hopeful that we will see a quick recovery,” he says. “If we are back to work by June, we should be Ok. If not, we could be facing the worst depression we’ve ever seen.”
Schwerman points out that many construction projects that had already started are still underway. However, startup of new projects may be much slower. Uncertainty over the future is having an impact.
“We’re getting rate pressure from all sides,” he says. “Rates are falling. We have to absorb some lower rates to address our fixed costs. We’re dropping price strategically to retain volume. We have to pay our bills and keep our drivers working. As they say, you’re only as strong as your weakest competitor.”
Southeast steady
Construction-related load volumes have held up relatively well for J&M Tank Lines Inc, according to Harold Sumerford Jr, chairman of the Birmingham, Alabama-based tank truck carrier. “We have stayed relatively strong, in part because one of our competitors left the market,” he says. “We’re not going gang busters but business isn’t bad.”
The carrier currently runs about 450 tractors and 550 dry bulk trailers dispersed among 15 terminals. Most operations are conducted in the eastern half of the United States, with a primary focus on the Southeast and Gulf Coast.
Construction materials hauling makes up about 25% of the activity at J&M Tank Lines, and shingles material hauling accounts for about half of the construction-related hauls. Sumerford says construction looks good for the coming months.
“Road construction is still underway across the southeast, and construction contractors have business on their books,” he says. “An infrastructure program from the federal government would be a great plus. Housing is soft but holding steady, and other construction activities also are moving forward.
“Rain delayed the start of road construction this year until March, but we’ve been very busy hauling cement ever since. We’ve had to move some trucks into cement hauling from other parts of our operation to keep up with demand.
“We also encountered some delays in March because road inspectors were off duty in Alabama until the state department of transportation got them back to work. That opened up a lot of projects. The governor of Florida also expedited some construction projects in that state. We see the potential for more construction activity as more states across the south reopen their economies.”
Worker safety
Sumerford says J&M Tank Lines has been able to avoid staff and driver layoffs. In late April, the carrier decided the time was right to reopen its headquarters office in Birmingham.
To address the risk posed by COVID-19, the carrier has implemented strict measures to keep workers safe. For instance, drivers must certify at the beginning of each shift that they have not come into contact with anyone diagnosed with COVID-19. To date, several drivers have been tested for COVID-19 but none have contracted the disease.
If a driver were to become sick with COVID-19, J&M Tank Lines procedures call for the driver’s truck to be locked up for three days followed by complete disinfection of the vehicle with a fog-type system. Next, every surface is wiped down with disinfectant.
Work shifts for drivers typically run 10-12 hours, and 80% of the drivers are home at the end of the shift. Roundtrips average 400 miles. Drivers report that shelter-in-place requirements have virtually eliminated delays due to traffic congestion.
Front range
Out on the front range of eastern Colorado, D G Coleman Inc in Commerce City had seen no downturn at all as of late April, according to Jim Coleman, chief operating officer and owner of the diversified truck fleet. The carrier operates 105 tractors and 132 trailers, including dry bulkers and tanks. Construction projects are supported with 50 dry bulk trailers that are used to haul cement and fly ash, as well as 25 end dumps and 10 belly dumps that handle aggregates and other materials.
“We’re still going strong, and there are a lot of building projects underway throughout the front range,” Coleman says. “Construction hauling accounts for 80% of our business, and our whole fleet is running. All 120 of our drivers are on the job.”
Despite a few snow days over the past winter, highway and road construction projects were running strong in eastern Colorado. Commercial construction included a new Amazon facility in southern Colorado. The housing market continues brisk.
“We have a strong backlog of construction projects going into October,” Coleman says. “Next year’s forecast hinges to a great degree on the residential market. A downturn certainly is possible.”
Coronavirus wall
Before COVID-19, 2020 was shaping up to be a very busy year for the
construction sector and the truck fleets that support it. Construction spending soared to $1.369 trillion in January with large public works and residential gains. Spending on construction continued to increase into February until it hit a COVID-19 wall.
“Spending in February declined 1.3% from an upwardly revised, exceptionally strong pace in January that was aided by unusually mild winter weather in much of the country,” says Ken Simonson, the Associated General Contractors of America chief economist. “Together, the rate in the first two months of 2020 represents a high-water mark immediately before government officials ordered widespread business closures and project owners canceled or halted work on their sites. The survey we conducted March 23-26 found that 39% of the more than 1,600 respondents said they had been directed to stop work on one or more projects.”
Simonson adds that 45% of respondents reported experiencing project delays or disruptions. Shortages of material, parts, and equipment, including vital personal protective equipment for workers such as respirators, were reported by 23% of respondents. Eighteen percent reported shortages of craftworkers, while 16% said projects were delayed by shortages of government workers needed for inspections, permits and other actions. Thirteen percent said delay or disruption had occurred because a potentially infected person had visited a jobsite.
By March, construction projects were being shut down and workers were being furloughed at an unprecedented rate across much of the United States. An AGC survey showed a dramatic decline in construction employment in 20 states and Washington DC.
Halted projects
In an AGC survey conducted in early April, 53% of the 830 respondents reported that a project owner had ordered a halt or cancellation to a current or upcoming project. The share of respondents reporting cancellations jumped to 19% from 7% a week earlier, suggesting that the volume of work will shrink rapidly once current projects finish. Another impediment to construction—listed by 27% of respondents—came from state and local officials who have ordered construction shutdowns.
The survey also found that 40% of respondents had furloughed or terminated workers by April 9, an increase from 31% just a week earlier. While 36% of firms reported furloughs or terminations of jobsite workers, layoffs also affected office and other workers at 18% of firms.
From March 2019 to March 2020, construction employment declined in 99 out of 358 metro areas as the coronavirus pandemic triggered shutdown orders and project cancellations, according to AGC.
The largest percentage decline in construction employment occurred in Laredo, Texas, which lost 19% or 800 jobs, followed by Lake Charles, Louisiana, which lost 18% (4,600 construction jobs). Lake Charles had the largest numerical decrease, followed by New York City, which lost 3,500 construction jobs (2%).
Construction employment increased over the year in 205 metro areas and was flat in 54. The largest percentage increases in construction employment occurred in Lewiston, Idaho-Washington (23%, 300 jobs), followed by Walla Walla, Washington (22%, 22 jobs). The largest numerical gain occurred in Dallas-Plano-Irving, Texas (10,200 jobs, 7%).
Layoffs underway
Layoffs came as the US Census Bureau reported declines in 10 out of 11 private nonresidential construction categories from February to March. The only exception—communication construction.
“In addition to the downturn in private construction, public categories were mixed,” Simonson says. “For instance, highway and street construction spending increased by 4.6%, which probably reflected favorable weather and the ability of highway contractors to work longer hours on nearly deserted roads. But other major public segments, including
educational construction and transportation structures such as transit projects, declined. Further declines in public construction are likely as state and local governments struggle to balance their budgets in the face of unbudgeted expenses and steep, unanticipated revenue decreases.
“Unfortunately, these numbers are only the beginning of what seems sure to be a steep decline in construction spending as current projects finish and new work is canceled or postponed indefinitely. Our latest survey found that projects as far out as June or later were being canceled in April.”
Losses mount
The latest numbers from AGC show that the construction industry lost 975,000 jobs from March to April, accounting for nearly 13% of the industry’s employment and was, by far, the worst one-month decline ever, according to AGC’s Simonson. He adds that unemployment among workers with recent construction experience soared by 1.1 million from a year earlier to more 1.53 million, while the unemployment rate in construction jumped from 4.7% in April 2019 to 16.6%.
An AGC survey of more than 800 construction firms found that while only 30% of firms report projects have been halted by government order—down from 35% two weeks previously—37% say construction firm owners have voluntarily halted work out of fears of the pandemic. Thirty-one percent report projects being canceled because of a predicted reduction in demand, and 21% report projects canceled as a result of a loss of private funding.
All told, 67% of firms report having a project canceled or delayed since the start of the COVID-19 outbreak in early March. These cancellations have forced some firms to cut staff. Twenty-three percent, for example, report cutting staff in March and 22% cut staff in April.
“Unfortunately, our survey indicates that layoffs are continuing to occur throughout the nation,” Simonson says. “Between March 1 and May 1, 39% of responding firms reduced their headcount. Reductions were particularly severe in the Northeast, where 53% of firms terminated or furloughed employees. The South had the fewest firms reporting staff reductions—29%, while 38% of firms in the Midwest and 45% in the West reduced headcount.”
Simonson adds that AGC has called on federal officials to take additional steps to prevent additional industry layoffs. Among those steps are clarifying the guidance regarding the paycheck protection program. He also noted that 61% of survey respondents say Congress should enact a “safe harbor” set of protocols to provide firms that are following safe practices with protection from tort or employment liability for failing to prevent a COVID-19 infection.
Simonson suggests that the Paycheck Protection Program has been a mixed blessing. Recent revisions by the Treasury Department to its guidance for the loans have prompted quite a few firms to consider returning the funds. Eighteen percent of firms report they are considering returning the funds because of the vague guidance, and most of these will be forced to cut staff as a result.
Infrastructure stimulus
Looking beyond short-term fixes, 43% of survey respondents hope for a larger federal investment in infrastructure, which will be especially vital as budget constraints force many state and local officials to curtail capital expenditures. And 32% of firms report they would like Washington DC to enact a COVID-19 business and employee continuity and recovery fund. And an equal percent wants Congress to fill state highway transportation departments’ immediate $50 billion funding gap.
The American Road & Transportation Builders Association (ARTBA) says once policy makers shift from a rescue focus in the wake of the coronavirus pandemic to economic recovery, robust transportation infrastructure investments have comprehensive benefits.
“Economic recovery from coronavirus begins with strategic road and bridge improvements,” ARTBA President Dave Bauer says. “Increased transportation investments support direct job creation and retention, while putting in place capital assets that will enhance US productivity for decades to come.”
Bauer notes the transportation construction industry is not seeking federal assistance, but it should be part of the solution. He says the Senate Environment & Public Works Committee’s July 2019 unanimously approved five-year highway reauthorization bill should be the starting point for discussions.
Nearly 231,000 US bridges need major repair work or should be replaced, according to an ARTBA analysis of the just released US Department of Transportation’s 2019 National Bridge Inventory (NBI) database. That figure represents 37%, or more than a third, of all US bridges.
If placed end-to-end, the length of these bridges would stretch over 6,300 miles—long enough to make a round trip across the country from New York City to Los Angeles and back again to Chicago. American drivers cross these bridges 1.5 billion times per day—representing one-third of all daily bridge crossings, according to the data.
More than 46,000 of those bridges are “structurally deficient” and in poor condition. They are crossed 178 million times a day. An additional 81,000 bridges should be replaced, says ARTBA Chief Economist Dr Alison Premo Black, who led the team conducting the analysis. One third of Interstate highway bridges (18,177 spans) have identified repair needs.
ARTBA estimates the cost to make the identified repairs for all 231,000 bridges in the United States at nearly $164 billion, based on average cost data published by the Federal Highway Administration (FHWA).
Looking forward
It’s a matter of debate whether bridge rebuilding and replacement should be the starting point for economic recovery from the coronavirus pandemic. However, there should be no debate over the importance of restarting the US economy immediately, and the construction industry and the truck fleets that support the construction companies are a critical part of that effort.
The US economy simply can’t be parked in idle for the rest of the year. We have to restart now, and it will take both government and private investment. We’re all in this together.
Stephen E Sandherr, AGC chief executive officer, puts it succinctly: “New infrastructure funding will put more people back to work in high-paying construction jobs in communities throughout the nation. New infrastructure funding will also give a needed boost to manufacturing and service sector firms that supply construction employers, all of which have been hard-hit by the coronavirus and the related economic shutdowns.”
AGC’s Simonson adds: “When projects shut down, jobs are lost not only in construction but also in a host of other industries, ranging from quarries to manufacturers, and truckers to professional services. Investing in infrastructure now will bring these jobs back sooner and will buy a lot more construction while fuel and materials costs are low.”