TRG | The Bottom Line – 1/12

TRG published our Q4’23 Heavy Materials & Infrastructure Survey this week, focusing on trends in the aggregate, concrete, asphalt and cement industries in North America. The highlight for the heavy materials and infrastructure as 2023 came to a close was M&A activity. A variety of deal flow with both public and private companies in Q4 sets the tone for 2024, which should prove to be another interesting year for the heavy materials industry. Industry contacts share that infrastructure funding and project flow through has been building momentum, with 2024 expected to exceed a solid 2023. Residential sentiment continues to improve as rates retreat from the near 8% mortgage rates with the Fed stopping rate hikes and signaling potential cuts throughout 2024. Mortgage applications have improved sequentially in 2H’23 as rate sentiment improved. Timing is still a factor in our view, and the air pocket continues to flow through the supply chain from the lower start environment throughout 2022 and 2023. Recent start rates for single family have picked back up as rates have come down and builders continue to offer incentives to get through the higher rate environment. The disconnect between ABI data and non-res PIP data (and feedback from the field) continues. While the ABI continues to languish below 50 for 7 months, November’s Non-res PIP data improved 18% YOY and flat sequentially, with 15 of 16 categories seeing growth YOY. Manufacturing notably was up 59% YOY, Commercial up 4% YOY, Education up 17% YOY, and Office up 6%. A large, private commercial construction contact noted that the ABI does not necessarily capture mega-projects that have been so pervasive in key growth markets. On the pricing side, we are finding greater variance in acceptance by market (and sub markets) on magnitude of aggregate price increases, a departure from trends over the past two years.