2018 OTR Forecast - TIRE INDUSTRY ASSOCIATION OTR Industry... · ©2017 TIRE INDUSTRY ASSOCIATION |...

©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved

2018 OTR Industry Forecast63rd Off-the-Road Conference

Sawgrass Marriott – Ponte Vedra, FL February 22, 2018

Kevin RohlwingSenior Vice President of Training


Equipment Fleet Size

Maintain75%

Reduce11%

Increase14%

Earthmoving Equipment

Source: American Road & Transportation Builders Association Market Forecast 2018



Maintain85%

Reduce3% Increase

12%

Paving & Compaction Equipment




Maintain69%

Reduce10%

Increase21%

Other Equipment



Equipment Fleet Condition

51

42

53 54

3531

39

30

45 44

58 56

4440

5044

0

10

20

30

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60

70

2014 Survey 2015 Survey 2016 Survey 2017 Survey

Percentage of Respondents w/Equipment in Need of Repair or Replacement

Earthmoving Paving/Compaction Other Total



Construction


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Forecast

U.S. Total Residential Construction Starts

Source: ConstructConnect/Oxford Economics

U.S. Construction


Residential Buildings 2016 2017 2018 2019 2020Single-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

U.S. Construction

Residential Buildings 2016 2017 2018 2019 2020Single-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


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Forecast

U.S. Hotel/Motel Construction Starts


U.S. Construction

2016 2017 2018 2019 2020Lodging 23% 5% 5% 3% 2%

Source: FMI Construction Outlook


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U.S. Sports Stadium & Convention Center Construction Starts

Forecast


U.S. Construction


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U.S. Retail/Shopping Construction Starts

Forecast


U.S. Construction


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U.S. Warehouse Construction Starts

Forecast


U.S. Construction


$0

$7

$14

$21

$28

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U.S. Private Office Construction Starts


Forecast

U.S. Construction


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U.S. Industrial/Manufacturing Construction Starts

Forecast


U.S. Construction


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U.S. Hospital & Clinic Construction Starts

Forecast


U.S. Construction


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U.S. Total Educational Construction Starts


U.S. Construction


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U.S. Roadwork Construction Starts

Forecast


U.S. Construction


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U.S. Civil (e.g., Power, etc.) Construction Starts

Forecast


U.S. Construction


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U.S. Grand Total Construction Starts

Forecast


U.S. Construction


Construction Forecast by State

2017 2018

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%

2017 2018

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



2017 2018

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%

2017 2018

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


Construction Forecast by Metro Area

Northeast 2017 2018

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 2017 2018

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%



Construction Forecast by Metro Area

Midwest 2017 2018

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 2017 2018

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%



Construction Forecast Segment

2017 2018

Residential 6% 6%Single-Family 9% 9%

Multi-Family 1% -1%

Non-Building 4% 4%Roads & Bridges 5% 6%

Infrastructure 3% 3%

2017 2018

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%



Construction Forecast Segment

2017 2018

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%

2017 2018

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


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%.


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.


Canada Construction Forecast

2017 2018Residential 1% 2%Non-Residential 1% 6%Non-Building -2% 7%

Total Construction -1% 4%

Canada Real GDP


• Alberta, British Columbia and Ontario are expected to perform better than national GDP.

Source: IMF World Economic Outlook


Canadian Construction Employment

2018-22 2023-27 2018-22 2023-27 2018-22 2023-27Total 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%

Residential Non-Residential Total

Source: Statistics Canada, BuildForce Canada


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.

Canada Construction Forecast


Aggregates


May 2017

Source: SC-Market Analytics

Aggregates



December 2017

Aggregates


The Wall

• 1,600 miles of concrete wall or 44 million tons of aggregate.• Additional 2% of total aggregate consumption for the U.S.



• 85% - Producers who have an optimistic outlook for the aggregate industry in 2018.

• 23% - Producers whose construction material sales jumped more than 10 percent in 2017.

• 12% - Producers who expect their 2018 construction material sales to jump more than 10 percent in 2018.

• 53% - 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

Aggregates


Source: Pit & Quarry 2017 State of the Industry Survey

Aggregates


2015 2016 2017e 2018f 2019f 2020fPublic 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 $205.0Total Support $55.0 $63.9 $59.9 $61.8 $63.5 $65.3Total Transport Construction $241.8 $254.2 $247.1 $255.0 $263.2 $270.3

+5% -3% +3% +3% +3%

Transportation Construction

Total Market Activity in Billions (2017 USD)



• 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)

Major Subway & Light Rail Projects

Expected to open after 2019



17001900

2100 2200 2300 24002600

0

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2015 2020 2025 2030 2035 2040 2045

Total Tonnage

Total U.S Rail Freight Tonnage

Source: Freight Analysis Framework

U.S. Rail Freight


• 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.

U.S. Airport Capacity


Aggregates Forecast

• Experts were forecasting a slight drop in aggregate demand in 2018 when compared to 2017.

• 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.


Mining


Coal Production


Coal Production

• U.S. Energy Information Administration (EIA) estimates that coal production will decrease by 2% in 2018.

• 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.


Base Metals

USD/tonne 6-17 9-17 12-17 3-18 6-18 9-18 12-18 3-19 6-19 9-19 12-19

Aluminum 2081 2010 2110 2110 2090 2070 2070 2070 2070 2070 2070

Copper 6906 6350 6800 6730 6660 6590 6590 6590 6590 6590 6590

Lead 2559 2330 2490 2490 2460 2440 2410 2410 2410 2410 2410

Nickel 11698 10540 11540 11430 11310 11310 11310 11310 11310 11300 11300

Zinc 3192 2960 3230 3250 3260 3280 3290 3290 3290 3290 3290

NAB Forecasts – Quarterly Average TermsForecasts

Source: Thomson Reuters; NAB Economics


Base Metals

Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18Aluminum USD/tonne 1750 1721 1732 1756 1755 1767 1768

Copper USD/tonne 5626 5517 5485 5587 5547 5598 5631

Lead USD/tonne 2233 2224 2230 2188 2165 2139 2118

Nickel USD/tonne 10887 10894 10942 11323 11345 11355 11376

Tin USD/tonne 20681 20245 20015 19791 19564 19326 19248

Zinc USD/tonne 2719 2692 2663 2680 2655 2636 2605

Iron Ore USD/tonne 63.9 58.9 57.0 58.2 57.3 56.3 56.4

Source: FocusEconomics

FocusEconomics Consensus Forecast Commodities Report


Base Metal Forecast v. Actual

NAB Q1 18 FE Q1 18 Jul 2017 Jan 2018Aluminum USD/tonne 2110 1756 1902 2210

Copper USD/tonne 6730 5587 5985 7065

Lead USD/tonne 2490 2188 2270 2580

Nickel USD/tonne 11430 11323 9491 12864

Tin USD/tonne 19791 20223 20696

Zinc USD/tonne 3250 2680 2787 3441

Iron Ore USD/tonne 58.2 67.7 76.3

Forecast Actual

Source: Index Mundi


Nickel

997110643 10204

96099155 8931

9491

10889 11215 1133511972

11495

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4000

6000

8000

10000

12000

14000

1-17 2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17

NICKEL PRICESNickel Prices USD/tonne

Source: Index Mundi


Base Metals Forecast


Precious Metals

Spot (3-10-17) Q1 17 Q4 17 Q4 18Gold USD/troy oz $1,200 $1,204 $1,204 $1,253Silver USD/troy oz $16.9 $17.0 $17.1 $18.1Palladium USD/troy oz $752 $728 $737 $800Platinum USD/troy oz $942 $978 $1,029 $1,100

Source: FocusEconomics


Gold

1234 1231

1266

1246

1260

1236

1283

1314

1279 1281

1264

1331

1180

1200

1220

1240

1260

1280

1300

1320

1340

2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18

GOLDGold USD/troy oz

Source: Index Mundi


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%.


Gold v. USD

1234 1231 1266 1246 1260 12361283 1314 1279 1281 1264

1331

101 100 99 96 95 93 93 93 95 93 92 890

200

400

600

800

1000

1200

1400

2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18

Gold USD

Sources: Index Mundi & Bloomberg Markets


Silver

17.93

17.63

18.03

16.7516.93

16.15

16.95

17.43

16.94 16.9817.17 17.13

15

15.5

16

16.5

17

17.5

18

18.5

2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18

SILVERSilver USD troy/oz

Source: Index Mundi


Palladium

774 799 830 822 851889

938 942984 1014

10691032

0

200

400

600

800

1000

1200

2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18

PALLADIUM USD TROY/OZPalladium USD troy/oz

Source: APMEX, Inc.


Platinum

1031

951 949 954

927941

998

915 921

945937

1001

840

860

880

900

920

940

960

980

1000

1020

1040

2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18

PLATINUMPlatinum USD troy/oz


Precious Metal Forecast v. Actual

Q4 – 17 Jul 2017 Q4 - 18 Jan 2018Gold 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

Forecast Actual

Sources: FocusEconomics & APMEX

Actual Forecast


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.


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 2018.

• Both palladium and platinum are expected to outperform projections for 2018.

• None of the precious metal projections indicate falling prices in 2018.


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.


Summary

Thank You!Kevin Rohlwing

Senior Vice President of Training

[email protected]

2018 OTR Forecast - TIRE INDUSTRY ASSOCIATION OTR Industry... · ©2017 TIRE INDUSTRY ASSOCIATION |...

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Transcript of 2018 OTR Forecast - TIRE INDUSTRY ASSOCIATION OTR Industry... · ©2017 TIRE INDUSTRY ASSOCIATION |...