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Simonson Says

RR062320 SimonsonJuly 21, 2020 – Ken Simonson, economist for the Associated General Contractors of America (AGC), said that most states added construction jobs through mid-June, a promising sign. "The U.S. economy expanded at a slight to modest pace since the prior report as business activity varied across the country,” the Federal Reserve reported in the latest “Beige Book,” a summary of informal surveys of businesses in the 12 Fed districts from mid-May through July 6. (Districts are referenced by the names of their headquarters cities.) “Construction remained subdued, but picked up in some Districts.” AGC posted excerpts from each district’s report, including the following comments relevant to construction. New York: New construction activity has remained quite sluggish, though many ongoing construction projects have begun to start up again, as restrictions have been eased. Cleveland: Nonresidential construction rebounded as delayed projects in some areas were restarted. However, several nonresidential builders indicated that there were few new projects entering the pipeline and that backlogs were being worked down, raising concerns that activity may weaken in the fall. Chicago: Nonresidential construction decreased slightly on net, with much of the activity representing work on projects in progress before the pandemic.

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The Cost of Congestion

RR071720 CongestedHighwayJuly 17, 2020 – The U.S. Interstate Highway System faces increasing congestion, unprecedented levels of travel – particularly by large trucks – and insufficient funding to make needed repairs and improvements, according to TRIP. Its new report, "Restoring the Interstate Highway System: Meeting America’s Transportation Needs with a Reliable, Safe & Well-Maintained National Highway Network," ranks state Interstate systems that are the most congested, have experienced the greatest increase in vehicle miles of travel (VMT) since 2000, carry the greatest share of commercial trucks, have the largest share of pavement in poor condition and bridges in poor/structurally deficient condition, and have the highest fatality rate. Need a new infrastructure bill soon, before these conditions worsen.

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Capstone Headwaters Releases Update

RR071620 capstoneJuly 16, 2020 – Capstone Headwaters released its Industrials & Manufacturing Update, reporting that after a three-month decline that brought U.S. manufacturing activity to its lowest level since the Global Financial Crisis, the industry showed signs of slight recovery in May and June. The simultaneous Oil & Gas supply and demand shock has created unprecedented disruption, with U.S. petroleum demand in April falling to its lowest level in 25 years. Overall, companies that provide products and services to the Commercial Aerospace, Automotive, and Oil & Gas markets have been the hardest hit while providers to the Defense, Medical, Food & Beverage, and select Chemical end markets have seen sustained demand throughout the pandemic. Regarding the impact of COVID-19, Capstone Headwaters said as companies begin to restart production and social distancing measures are reduced, we should see industry activity begin to climb, though the road to recovery is expected to be slow with several subsectors faring much worse than others. The headwinds created by COVID-19 have yet to be broadly realized and are expected to be more closely scrutinized as a new normal emerges.

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Frac Sand Blues

RR071020 CDEJuly 10, 2020 – It's not a good time to be a frac sand producer. With oil prices still hovering around $40 per barrel, and no COVID-19 end in sight, frac sand producers are falling like dominoes. Recent developments include bankruptcies from major producers Covia, Hi-Crush and Vista Proppants and Logistics. While these companies are not going away – they are restructuring debt and trying to find a new normal – there is no mistaking that the carnage is real. Well production is low. Frac sand operations have closed and workers have been laid off. And there does not seem to be any light at the end of the tunnel. If there is any positive news, it comes out of Canada, where the Alberta government has proposed legislation that would redefine “minerals” and “pits,” allowing about 500 sand projects to proceed without having to submit environmental impact assessments. Now if there is a market for the sand products, we will have something to hang our hat on.

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Moving Forward Act

RR070220 NewHighwayBillJuly 2, 2020 – With the passage in the House of Representatives of the Moving Forward Act – a $1.5 trillion plan to rebuild the nation’s infrastructure – House Democrats have done something other than just talk about the need to repair our roads and bridges. The plan includes $319 billion for highways and of course only cursory mention of a pay-for or an increase in gas taxes. But then again, as a COVID-19 stimulus, that appears to be a moot point at this stage in U.S. history. While there is much to like in the bill, I fear it tries to do too much in one fell swoop, addressing issues such as clean energy, electric vehicles, transit and rail – all important issues, but maybe better addressed separately. I don't see how this plan can be reconciled with the Senate's bill, America’s Transportation Infrastructure Act of 2019. The U.S. Senate Committee on Environment and Public Works passed the legislation unanimously, 21-0, and it is much more narrowly focused. The bill authorizes $287 billion over five years for roads and bridges: not nearly enough, by the way. Compounding the difficulties of reconciliation, Senate Majority Leader Mitch McConnell (R-Ky.) seems to have no interest whatsoever in bringing that legislation to the floor for a vote. The Trump Administration also appears to be the Grim Reaper for infrastructure, suggesting a veto is waiting for anything like the House bill. Meanwhile the September expiration of the FAST Act is coming, well, fast. Our congressional representatives need to get their acts together in short order. The nation's crumbling infrastructure should not be held hostage to the bloodsport of party politics.

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