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Archive for March, 2013

March 26, 2013

Posted by nahetsblog on March 27, 2013

Construction Employment Expands in Two-Thirds of States in January

Construction employment expanded in two-thirds of all states in January as the industry showed signs of emerging from a six-year slump, according to an analysis by the Associated General Contractors of America of Labor Department data. Association officials cautioned however that the industry’s recovery remains fragile and that current and looming federal budget cuts threaten to drag down construction employment in numerous states.

“These results show that contractors are finding work in more parts of the country than they have for many months,” said Ken Simonson, the association’s chief economist.

From January 2012 to January 2013, 24 states and the District of Columbia added construction jobs, 25 shed workers and one – Wisconsin – had no change. D.C. jumped to the top ranking for percentage of new construction jobs (9.4 percent, 1,200 jobs); followed by North Dakota (9.0 percent, 2,500 jobs); Hawaii (8.0 percent, 2,300 jobs); Alaska (7.2 percent, 1,200 jobs) and Washington (6.0 percent, 8,200 jobs).

Texas (28,500 jobs, 5.0 percent) added the most new construction jobs over the past 12 months, followed by California (17,600 jobs, 3.0 percent) and Washington.

Among states losing construction jobs during the past year, Arkansas lost the highest percentage (-10.5 percent, -5,100 jobs), followed by Rhode Island (-8.0 percent, -1,300 jobs); Montana (-7.2 percent, -1,700 jobs) and South Dakota (-6.4 percent, -1,400 jobs). Illinois lost the most jobs (-9,800 jobs, -5.0 percent), followed by Virginia (-7,500 jobs, -4.2 percent); Ohio (-5,200 jobs, -2.8 percent) and Arkansas.

Simonson noted that 34 states and Washington D.C. added construction jobs between December and January, while employment slipped in 14 states and held steady in two states. Wyoming had the largest percentage increase (4.6 percent, 1,000 jobs); followed by New York (4.2 percent, 13,000 jobs). New York added the largest number of jobs, by far—probably reflecting recovery work from Hurricane Sandy.

Alaska and South Dakota had no change in construction employment over the month, while 14 states lost jobs, with Arkansas having the steepest percentage drop (-5.0 percent, -2,300 jobs); followed by Kansas (-4.0 percent, -2,200 jobs). Arkansas lost the largest number of jobs for the month; followed by Kansas and Pennsylvania (-2,200 jobs, -1.0 percent).

“Construction spending has been rising for two full years but contractors have been cautious about adding workers until they knew the upturn would last,” Simonson said. “In 2013, both residential and private nonresidential construction should rise enough to offset a further slowdown in public work, and contractors will be looking for more workers.”

Association officials said the cuts in federal funding for construction triggered both by the sequestration that took effect earlier this month and by spending bills now advancing in Congress would fall hardest on construction employers in states that have a large federal government presence.

Planning, teamwork corrects heavy equipment spill

Rachel Dove-Baldwin

Staff Writer

22 MINE ROAD — A piece of heavy machinery owned by Coal-Mac came off of a flat-bed transport truck turning onto 22 Mine Road from U.S. 119 and ended up on its side, where it remained for two days until a plan was implemented to place it right side up.

According to information provided by Mingo County Emergency Services Director Jerrod Fletcher, the accident occurred at approximately 10 a.m. on Friday and was cleaned up Sunday afternoon around 4 p.m. The Caterpillar 993K front-end loader, weighing almost 295,000 lbs., suffered cosmetic damage after coming off the side of the flat bed as the truck turned onto 22 Mine Road. The driver for J.P. Technical Services that was transporting the machinery to the mine site relayed that it felt like an earthquake had occurred when the in loader slammed onto the pavement and said it sounded like a sonic boom. No one was injured in the mishap.

Four large dozers and two cranes had to be brought to the location to help put the 993K upright. One lane of U.S. 119 was blocked for a period of time while the pieces of large machinery attempted the operation. Cables had to be hooked to the in loader from various directions to pull it from its side and place it back on its wheels.

Fletcher asked to say a special thank you to Chris Sykes and Jeremy Blankenship from Coal-Mac, along with everyone else at the scene, for all the assistance man power and equipment they supplied.

“It took some planning, quite a few pieces of heavy equipment and teamwork to get the job done, but we were successful,” commented Fletcher.

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CA Board Seeks 8.6 Billion High Speed Rail Bonds

Posted by nahetsblog on March 22, 2013

The project eventually is supposed to link Northern and Southern California with trains traveling up to 220 mph.

THE AP REPORTS TODAY: The California High-Speed Rail Authority voted Monday to issue nearly $8.6 billion in taxpayer-approved bonds to build the nation’s first bullet train as the state rushes to begin construction in July.

Officials are now on track to sell $3.7 billion of the bonds. That includes $2.6 billion for high speed rail and another $1.1 billion for improving existing commuter rail systems in Northern and Southern California.

Lawmakers appropriated the $3.7 billion last year, but the Legislature would have to act again to appropriate the remainder of the $8.6 billion before the entire amount can be issued.

The six-member board authorized selling the bonds on a 5-0 vote, without debate and with one member absent. Timing of the sale will now be set by the governor, attorney general and state treasurer, though the first opportunity to sell the bonds will be this fall, said Tom Dresslar, spokesman for Treasurer Bill Lockyer.

“It’s another step towards the process of breaking ground on the nation’s first high speed rail system in California this summer,” authority Chairman Dan Richard said after the vote.

The project still must withstand lawsuits that have court hearings in coming months. They include a hearing April 19 over the project’s environmental impacts, while a May 31 hearing will consider whether the funds meet the requirements set by voters when they approved the high speed rail program in 2008.

Adverse rulings in those lawsuits could stall the bond money, though Richard said groundbreaking can proceed using $3.

3 billion in federal matching funds.

The first full segment of the $68 billion rail line will run from Madera to Bakersfield. The project eventually is supposed to link Northern and Southern California with trains traveling up to 220 mph.

Contractors have submitted bids to design and build the first $1.8 billion, 30-mile stretch of track. The bids from five international design teams will be opened later this spring, Richard said. The authority also is in the process of negotiating to buy land for the project’s right of way.

“Everything about this project is ambitious,” Richard said, but he predicted the authority will meet its construction timetable.

Interest payments on the entire amount would cost the state an estimated $700 million a year for 35 years, but at least the $175 million in annual debt payments on the initial bonds would come from fees paid by commercial truckers, not from the state’s general fund, Richard said. He said it is not clear if the overweight fees from truckers would cover the entire amount.

Not all the bonds will be sold at once, said state Department of Finance spokesman H.D. Palmer. “In fact, you don’t want to sell them all now – it would be like drinking out of a fire hydrant.”

Several speakers challenged the timing of the authorization during the board’s public comment period, asking why the board was acting on the bulk of the bonds approved by voters now when it could be years before the money is needed. Kevin Dayton, a public policy consultant from Roseville, questioned whether the board was rushing to beat the outcome of the lawsuits attempting to block the railroad.

“That’s the obvious question that comes up,” Dayton said. “I think it’s reasonable to assume they’re very worried about it.”

But Richard said the board was merely being efficient by authorizing all the bonds now, so it would not have to revisit the issue in coming years.

The authority would have to comply with a court order no matter what steps it has taken, he said, and state officials are unlikely to issue the bonds until they are satisfied that they will not be blocked by the courts.

“We have to resolve those issues before the court and we are very confident about that,” Richard said. “I think until those matters are resolved, I’m not sure the treasurer would go forward with this.”

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Contractor Survey on 2013

Posted by nahetsblog on March 22, 2013

Construction News Pro survey results of contractors across US:

"How do you think the 2013 construction economy will compare to 2012?"

ri?ts=1fHNpZD02MjU5fHJhaWQ9OTg4ODM2OGEtZDQzZC00OTIzLWFiMTItMjIxNDM2MzNkMjdmfGF1aWQ9Nzc1MjJ8YWlkPTE2NDc2OXxwdWI9MTAzNTh8bGlkPTEwMDcxNXx0PTR8cmlkPTMxNTc1MjZmLTRkNGYtNDU0MC1iZDdjLWFmODQzZmI4ZDU2ZXxvaWQ9MzMxNjJ8Ym09QlVZSU5HLkhPVVNFfHBjPVVTRHxwPTB8YWM9VVNEfHBtPVBSSUNJTkcuQ1BNfHJ0PTEzNjM5Njg5ODd8cHI9MHxhZHY9NDY1MA&cb=66641615

Here’s what you said:

  • 53% Better than 2012
  • 34% The same as 2012
  • 14% Worse than 2012

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March 17, 2013

Posted by nahetsblog on March 17, 2013

New Equipment Watch Quarterly Report Offers Data on Heavy Equipment Auction Market Trend

EquipmentWatch, a leading construction research company and database information products provider, unveiled a quarterly benchmark report “Heavy Equipment Auction Market Trending.” The report, targeted to auctioneers, original equipment manufacturers, statisticians, equipment analysts and economists, offers analysis of auction activity by price, region, manufacturer and equipment type.

The first report covers Sept. 1 through Nov. 30, 2012. Key report findings include:

  • Total sales for the heavy equipment auction market increased from the previous quarter, however the sales numbers represented a downward trend compared to the previous year;
  • Western Canada and the Southeast United States represented the largest regions by volume of equipment sold during this period. The largest increase year over year was in Central Canada;
  • Crawler-mounted hydraulic excavators topped the list of heavy construction equipment types sold at auction. The average age of all construction equipment recorded was about 12 years;
  • Caterpillar equipment led all manufacturers in terms of volume sold, followed by Deere, Komatsu, Volvo and Bobcat.

The report is focused on data analyzed in context using data drawn from EquipmentWatch’s “The Last Bid” database of more than 1.3 million records. “The Last Bid” is an authoritative guide to current auction values for used heavy equipment and trucks. Regions were selected based upon the Bureau of Economic Analysis standards and the 4-region Canadian model.

“For 15 years, our data has provided key metrics to the heavy equipment auction marketplace,” said Garrett Schemmel, director, brand management, EquipmentWatch. “This new series of reports offers a comprehensive view of the industry, and also serves as a leading indicator of market activity. As the first and only company to offer verified analyzed intelligence, we recognize the value of this data to the industry to deliver unprecedented insights to inform buying decisions.”

To access the new equipment auction trend report, go to: brian.deweyor (770) 618-0201.

EquipmentWatch, owned by Penton Media, serves more than 15,000 professional, high-volume users of construction and lift-truck data. Its online and print products are used in decisions surrounding the purchase, valuation, operation and disposal of equipment. For nearly 50 years, EquipmentWatch has served contractors, equipment manufacturers, dealers, lenders and insurers and government agencies involved in large infrastructure construction.

Penton’s Equipment Watch Introduces A New Industry Benchmark: "Heavy Equipment Auction Market" Quarterly Trending Report

First in a Series of Equipment Intelligence Reports to Inform Equipment Buying Decisions

By Penton

NEW YORK, March 14, 2013 — /PRNewswire/ — A new quarterly benchmark report for the construction equipment industry, "Heavy Equipment Auction Market Trending," was unveiled today by Penton’s EquipmentWatch, the world’s leader in heavy construction research, and the leading provider of database information products for the construction equipment industry.

Targeted to auctioneers, original equipment manufacturers, statisticians, equipment analysts and economists, the report is the first in a new series of verified industry intelligence studies designed to establish more robust benchmarks for the equipment auction marketplace.

"Heavy Equipment Auction Market Trending" is the latest Penton initiative to innovate data and workflow tools for its user markets. Other recently launched workflow tools include Penton’s Source ESB electronic parts digital sourcebook and Trusts & Estates Plus, an iPad app featuring exclusive content from wealthmanagement.com.

"For 15 years our data has provided key metrics to the heavy equipment auction marketplace," said Garrett Schemmel,Director, Brand Management,EquipmentWatch. "This new series of reports offers a comprehensive view of the industry, and also serves as a leading indicator of market activity. As the first and only company to offer verified analyzed intelligence we recognize the value of this data to the industry to deliver unprecedented insights to inform buying decisions."

The "Heavy Equipment Auction Market Trending" report analyzes activity by price, region, manufacturer and equipment type, thereby providing a quick snapshot of industry trending by all major metrics. Key report findings include:

  • Total sales for the heavy equipment auction market increased from the previous quarter, however represented a downward trend when compared year over year.
  • Western Canada and the Southeast United States represented the largest regions by volume of equipment sold during Fall 2012. The largest increase year over year was seen in Central Canada.
  • Crawler mounted hydraulic excavators topped the list of heavy construction equipment types sold at auction. The average age of all construction equipment recorded was around 12 years.
  • Caterpillar equipment led all manufacturers in terms of volume sold, followed by Deere, Komatsu, Volvo and Bobcat.

The report is focused on data collected between September 1, 2012 and November 30, 2012, and analyzed in context using data drawn from EquipmentWatch’s "The Last Bid"™ database of 1.3+ million records. "The Last Bid" is an authoritative guide to current auction values for used heavy equipment and trucks. Regions were selected based upon the Bureau of Economic Analysis standards and the 4-Region Canadian model.

Industry professionals interested in accessing the new equipment auction trend report will find it here: brian.dewey or 770.618.0201.

About EquipmentWatch EquipmentWatch is the trusted source for heavy equipment and material handling equipment data, produces the leading database information products for the construction equipment industry and is the world leader in heavy construction research. EquipmentWatch serves more than 15,000 professional, high-volume users of construction and lift-truck data. Our online and print products are valuable tools in decisions surrounding the purchase, valuation, operation, and disposal of equipment.

For nearly 50 years, EquipmentWatch has served contractors, equipment manufacturers, dealers, lenders and insurers, and government agencies involved in large infrastructure construction.

About Penton For millions of business owners and decision-makers, Penton makes the difference every day. We engageour professional users by providing actionable ideas and insights, data and workflow tools, community and networking, both in person and virtually, all with deep relevance to their specific industries. We then activatethis engagement by connecting users with tens of thousands of targeted providers of products and services to help drive business growth. Learn more about our company at www.penton.com.

Penton is a privately held company owned by MidOcean Partners and U.S. Equity Partners II, an investment fund sponsored by Wasserstein & Co., LP.

Read more here: http://www.sacbee.com/2013/03/14/5262409/pentons-equipmentwatch-introduces.html#storylink=cpy

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March 13,2013

Posted by nahetsblog on March 13, 2013

January Nonresidential Construction Materials Project Prices Turn Up

03/13/2013 by Bernard M. Markstein

Overview
Prices for inputs used in nonresidential construction turned up after three months of decline. Prices for cement, energy, energy-related products, and wood products were among the main drivers sending the index higher. Higher energy prices are now working their way through various product prices. A slowdown in federal construction projects due to budget cuts, which include the current sequestration, and a general slowdown in nonresidential construction should put some downward pressure on building materials prices. At the same time, increased residential construction activity is providing upward pressure on prices. In general, over the course of this year, expect prices to rise roughly in line with or slightly faster than overall inflation. Better than expected growth would result in building materials prices increasing at a faster rate.

Construction Materials Inflation
The Producer Price Index (PPI) for materials and components used in construction rose 0.5% on a seasonally adjusted (SA) basis in January after rising 0.2% in December according the Bureau of Labor Statistics (BLS) and was the sixth consecutive monthly increase. The index was up 2.7% on a not seasonally adjusted (NSA) year-over-year basis and was up 9.3% since January 2010. Meanwhile, prices for raw materials used in construction or to produce products used in construction rose 0.1% after increasing 0.2% in December. The index was up 2.8% from January 2012 and was up 6.9% from January 2010.

An index that measures inputs used in nonresidential construction (excluding capital equipment) advanced 0.6% (NSA) in January after declining 0.3% in December. January’s increase ended a string of three consecutive monthly declines. The index was up 0.8% from January 2012.

The BLS began reporting a new index that captures the change in the cost of constructing health care buildings. The index includes material costs, labor and equipment costs for installation, as well as including a margin for overhead and profit. Since this is a new index, only limited historical data are available at this point. Because of this, seasonally adjusted numbers are not available. The new index has been added to the table below.

US Construction-Related Price Indexes
Percent Change
Monthly
from Previous Month

NSA data unless
otherwise indicated
3-Month Moving Average
from Previous Month

NSA data unless
otherwise indicated
Year-over-year
NSA data
3 Years Ago
NSA data
Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13
Composite Indexes (Exclude capital equipment)
Construction Materials*
(Unprocessed materials)
0.1 0.2 0.0 0.1 0.2 0.0 2.8 2.7 2.5 6.9
Materials and Components for Construction*
(Processed goods)
0.5 0.2 0.1 0.3 0.2 0.2 2.7 2.7 2.4 9.3
Inputs to Construction
(Residential and Nonresidential)
(Includes inputs to maintenance and repair)
0.7 -0.1 -1.1 -0.2 -0.5 -0.2 1.3 1.3 1.0 11.4
Inputs to New Construction 0.7 -0.1 -1.0 -0.1 -0.5 -0.2 1.5 1.5 1.2 11.5
Inputs to Residential Construction 0.7 0.1 -0.7 0.0 -0.3 -0.2 2.1 2.0 1.7 11.4
Inputs to Nonresidential Construction 0.6 -0.3 -1.3 -0.3 -0.7 -0.2 0.8 0.8 0.6 NA
Inputs to Commercial Construction 0.6 -0.1 -0.7 -0.1 -0.4 -0.1 1.3 1.1 0.9 NA
Inputs to Industrial Construction 0.4 -0.2 -1.0 -0.3 -0.5 -0.2 0.6 0.8 0.7 NA
Inputs to Heavy Construction 0.6 -0.3 -1.6 -0.4 -0.8 -0.3 0.6 0.7 0.5 NA
Inputs to Maintenance and Repair 0.7 -0.3 -1.2 -0.3 -0.6 -0.2 0.4 0.0 -0.3 11.1
Inputs to Nonresidential Maintenance
and Repair
0.7 -0.3 -1.3 -0.3 -0.6 -0.2 0.2 -0.2 -0.7 10.8
Inputs to Res Maintenance and Repair 0.7 0.0 -1.1 -0.2 -0.6 -0.2 1.6 1.7 1.4 12.2
(Indexes include installation and overhead)
New Warehouse Building Construction 1.0 0.0 0.0 0.3 0.1 0.1 2.9 2.6 2.5 8.0
New School Building Construction 0.3 0.0 -0.3 0.0 0.0 0.0 0.9 1.1 1.2 6.9
New Office Construction 0.4 0.0 0.0 0.1 0.1 0.1 0.9 1.3 1.3 5.3
New Industrial Building Construction 0.5 0.0 0.1 0.2 0.2 0.1 1.3 1.4 1.2 5.5
New Health Care Building Construction 0.6 -0.1 -0.1 0.1 0.0 0.0 NA NA NA NA
Other Related Indexes
PPI Finished Goods* 0.2 -0.3 -0.4 -0.2 -0.3 0.2 1.4 1.3 1.5 9.4
PPI Finished Goods less food and energy* 0.2 0.1 0.2 0.2 0.1 0.1 1.8 2.0 2.2 6.6
CPI Urban Consumer* 0.0 0.0 -0.2 -0.1 0.0 0.2 1.6 1.7 1.8 6.3
CPI Urban Consumer less food and energy* 0.3 0.1 0.1 0.2 0.1 0.1 1.9 1.9 1.9 5.2
Production Index: Construction Supplies* -0.1 1.0 2.5 1.1 1.1 0.9 2.0 2.7 3.5 19.4
Retail Sales: Building & Equipment Supplies* 0.3 0.3 1.2 0.6 0.0 0.8 5.7 -0.2 5.4 25.9
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data
NSA = Not seasonally adjusted, NA = Not Available
Source: Producer Price Index (PPI) – Bureau of Labor Statistics; Production Index – Federal Reserve Board; Retail Sales – Census Bureau

Construction machinery prices were up 0.3% (SA) in January, the same as December’s increase. Construction machinery rental rates also rose 0.3% (NSA) following a jump of 1.1% in December. Despite a recent shift in the preference away from purchasing construction equipment to renting equipment, on a year-over-year NSA basis, rental rates have increased at a slower rate than the rate of increase for purchase prices — 1.5% versus 4.0%. Meanwhile, rental rates were up 4.5% since January 2010 while purchase prices were up 10.0%. Nonetheless, we still expect rental rate inflation to generally exceed equipment purchase price inflation over the course of this year.

To increase coverage of items commonly used in commercial construction projects we have added coverage of the PPI for “Air-conditioning, Refrigeration; and Forced Air Heating Equipment Manufacturing” to the table below. This index reflects changes in prices that are charged by producers, or to look at it another way, what most buyers (in this case, builders) pay.

US Construction-Related Price Indexes
Percent Change
Monthly
from Previous Month

NSA data unless
otherwise indicated
3-Month Moving Average
from Previous Month

NSA data unless
otherwise indicated
Year-over-year
NSA data
3 Years Ago
NSA data
Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13
Assembled Equipment
Hand and Edge tools 0.6 -0.3 0.0 0.1 0.0 0.6 2.7 2.8 3.2 3.8
Power Hand Tools 0.6 0.2 0.2 0.3 0.1 0.1 1.5 1.3 1.4 3.5
Appliances* -0.6 0.6 -0.9 -0.3 0.3 0.1 2.2 4.0 3.7 6.6
Furnaces -2.0 1.0 -0.2 -0.4 0.5 0.1 -0.6 2.1 0.5 4.3
AC; Refrigeration; and Forced Air Heating Equip. Mfg. -1.2 1.3 0.8 0.3 0.6 0.1 1.3 2.2 0.8 6.5
Construction Machinery* 0.3 0.3 0.6 0.4 0.5 0.3 4.0 3.8 4.1 10.0
Construction Machinery Rental (incl. oilfield equip.) 0.3 1.1 1.0 0.8 0.4 0.4 1.5 0.1 0.6 4.5
Construction equipment rental and leasing 0.0 0.7 1.4 0.7 0.7 0.9 0.6 -0.4 1.8 4.4
Oilfield and well drilling equipment rental
and leasing
1.7 3.5 0.0 1.7 0.0 -1.1 5.7 4.0 -0.4 8.4
Trucks over 14,000 Ibs. GVW 0.6 0.3 0.5 0.5 0.1 0.0 2.1 2.2 1.8 8.0
Metal Doors, Sash and Trim 0.1 -0.1 0.0 0.0 0.0 0.0 1.8 1.8 2.0 9.7
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data
NSA = Not seasonally adjusted, NA = Not Available
Source: Producer Price Index (PPI) – Bureau of Labor Statistics

Cement and Concrete
Cement prices shot up 1.8% (NSA) in January, their largest monthly increase in almost four years, after no change in December. Prices were up 3.6% from January 2012 but were down 2.2% from January 2010.

Prestressed concrete products prices rose a more modest 0.6% after edging up 0.1% in December. On a year-over-year basis, prices were up 0.6%, and they were up 2.5% from January 2010. Precast concrete products prices rose 0.3% in January after surging 1.6% in December. Prices were up 2.5% from January 2012 and were up 7.2% from January 2010.

US Construction-Related Price Indexes
Percent Change
Monthly
from Previous Month

NSA data unless
otherwise indicated
3-Month Moving Average
from Previous Month

NSA data unless
otherwise indicated
Year-over-year
NSA data
3 Years Ago
NSA data
Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13
Construction Commodities
Dimension Stone 1.9 0.0 0.1 0.7 0.0 0.1 2.8 1.3 1.6 3.2
Cement 1.8 0.0 0.2 0.7 0.0 0.0 3.6 3.4 3.6 -2.2
Construction Sand, Gravel & Crushed Stone* 0.2 0.1 0.0 0.1 0.2 0.0 2.9 2.3 2.1 6.2
Softwood Plywood 4.3 1.2 -3.6 0.6 -1.2 -0.4 20.9 19.6 21.0 36.2
Hardwood Lumber 1.9 0.2 0.2 0.8 0.5 0.4 4.0 1.6 1.7 8.2
Softwood Lumber* 6.7 2.1 5.1 4.6 1.7 1.2 24.8 17.3 13.7 30.5
Other Commodities
Industrial Natural Gas* 0.0 1.4 0.9 0.7 1.3 0.9 -1.6 -5.0 -8.2 -18.1
Plastic Resins & Materials 1.6 -0.7 -0.6 0.1 0.5 0.3 3.0 3.5 2.3 22.5
Insulation Materials 2.0 0.1 -0.5 0.5 -0.4 -0.7 5.4 5.1 5.1 17.9
Iron & Steel Scrap 0.3 0.9 11.9 4.1 0.0 -0.8 -19.9 -15.5 -11.0 9.6
Iron Ore -3.6 0.0 0.1 -1.2 1.7 0.3 -8.9 -3.8 1.2 23.7
Copper Ores 1.9 -2.6 -4.4 -1.8 -2.3 0.9 -2.0 1.6 1.3 11.0
Copper Base Scrap* -0.4 2.0 -0.6 0.3 1.1 1.9 1.2 0.9 -0.7 14.5
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data
NSA = Not seasonally adjusted, NA = Not Available
Source: Producer Price Index (PPI) – Bureau of Labor Statistics

Energy and Related Products
Diesel fuel prices continued their recent upward movement, increasing 0.9% (SA) in January after soaring 2.6% in December. Despite the recent surge, diesel prices were down 1.0% (NSA) from January 2012 but were up 39.0% from January 2010.

Industrial natural gas prices were flat in January, a bit of a reprieve following five months of increases, including December’s 1.4% (SA) jump. Still, industrial natural gas prices were down 1.6% from January 2012 and were down 18.1% from January 2010. Natural gas remains a considerable bargain relative to oil.

Plastic resins and materials prices also shot up, increasing 1.6% (NSA) in January after decreasing 0.7% in December. Prices were 3.0% higher than in January 2012 and were 22.5% higher than in January 2010.

Surprisingly, asphalt prices declined dramatically for the third consecutive month and the seventh month out of the last eight months, plummeting 6.0% (NSA) in January after falling 2.0% in December. Prices were 10.6% lower than in January 2012 but were 16.2% higher than in January 2010. However, asphalt roofing prices rose 0.9% in January following a 1.1% drop in December. Prices were up 0.7% from January 2012 and were up 7.5% from January 2010.

Plastics pipe prices moved 1.9% (NSA) higher in January after no change in December. They were up 10.2% from January 2012 and were up 27.3% from January 2010. Plastics plumbing fixtures prices however, tumbled 2.7% after advancing 0.3% in December. That left prices down 1.2% from January 2012, but up 3.8% from January 2010.

US Construction-Related Price Indexes
Percent Change
Monthly
from Previous Month

NSA data unless
otherwise indicated
3-Month Moving Average
from Previous Month

NSA data unless
otherwise indicated
Year-over-year
NSA data
3 Years Ago
NSA data
Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13 Dec-12 Nov-12 Jan-13
Manufactured Materials
Gypsum Products 11.8 -0.3 0.4 4.0 -0.2 -0.5 20.4 14.0 14.9 30.1
Petroleum refineries 1.0 -2.4 -8.3 -3.4 -4.5 -1.9 -4.7 -3.2 -3.8 29.5
Diesel Fuel* 0.9 2.6 -9.1 -2.1 -1.5 -0.3 -1.0 1.8 -4.0 39.0
Asphalt -6.0 -2.0 -7.5 -5.2 -2.2 -2.4 -10.6 -2.5 3.2 16.2
Asphalt paving mixture & block mfg. 0.5 -0.2 0.0 0.1 -0.1 -0.3 3.2 4.0 4.5 16.5
Asphalt shingle and coating materials mfg. 0.4 -0.9 -0.5 -0.3 -0.8 0.1 0.3 -0.2 1.6 10.1
Asphalt Roofing 0.9 -1.1 -0.5 -0.2 -1.1 0.0 0.7 -0.6 1.4 7.5
Paint 1.1 -0.4 0.0 0.2 -0.1 0.0 0.5 10.1 10.5 15.7
Plastic Construction Products 0.2 0.2 0.4 0.3 0.3 0.3 4.0 4.7 4.5 11.5
Plastics Pipe 1.9 0.0 0.6 0.8 1.0 1.3 10.2 12.4 11.8 27.3
Plumbing Fixtures -2.7 0.3 0.1 -0.8 0.1 0.1 -1.2 2.1 1.7 3.8
Vitreous Plumbing Fixtures 0.6 0.6 -1.1 0.0 0.3 0.1 0.9 1.7 1.1 5.9
Ceramic Tile -0.9 0.4 -0.5 -0.3 0.6 0.0 -0.5 0.7 0.4 -1.3
Flat Glass 0.4 -0.7 0.3 0.0 -0.1 0.3 2.2 1.0 2.3 2.0
Steel Mill Products -0.1 0.9 -1.3 -0.2 -0.8 -0.6 -8.3 -7.9 -9.1 12.9
Steel Pipe and Tube* -2.5 0.7 -0.4 -0.8 -0.2 -0.3 -8.8 -6.1 -6.7 20.1
Hot rolled bars, plates & structural shapes 0.5 1.6 -2.0 0.0 -0.7 -0.6 -9.8 -9.6 -12.0 15.0
Extruded Aluminum rod, bar and other shapes 3.4 -0.5 -0.7 0.7 0.5 0.4 0.7 -3.4 -5.1 5.6
Architectural Metalwork 0.3 -0.1 0.2 0.1 0.0 -0.1 0.9 0.5 0.6 7.3
Metal Plumbing Fixtures* 0.0 0.2 0.0 0.0 0.2 0.3 1.3 1.7 1.6 5.6
Builders’ Hardware -0.5 -0.6 0.4 -0.2 -0.1 0.2 -0.2 0.5 1.2 7.7
Sheet Metal Products -1.5 0.0 0.0 -0.5 0.0 0.0 -2.1 -0.5 -1.4 5.6
Copper and Copper Products 1.2 1.3 -3.6 -0.4 -0.3 0.7 0.6 0.2 -1.7 5.7
Copper and Brass Mill Shapes 0.6 1.5 -3.3 -0.4 0.2 0.9 2.9 1.0 -0.9 -2.1
Nonferrous Pipe and Tube 2.6 -0.8 -1.5 0.1 0.2 2.4 3.5 -1.7 -1.1 2.0
Building Brick -1.3 0.1 -0.2 -0.5 0.0 -0.1 -1.8 -2.9 -3.4 -7.8
Ready Mix Concrete* 0.3 0.2 0.0 0.2 0.2 0.1 2.3 2.3 2.4 2.3
Concrete Block & Brick -0.2 0.6 -0.3 0.0 0.2 0.0 0.8 1.5 0.8 1.5
Prestressed Concrete 0.6 0.1 -0.1 0.2 0.0 -0.3 0.6 -0.2 -0.2 2.5
Precast Concrete Products 0.3 1.6 -0.2 0.5 0.4 -0.2 2.5 2.6 1.3 7.2
Concrete Pipe 0.7 0.6 -0.7 0.2 0.7 0.5 5.0 4.3 3.2 6.4
Engineered Wood Products 2.1 2.3 1.2 1.9 1.3 1.4 15.1 12.5 9.7 20.5
Wood Kitchen Cabinet and Countertop Mfg. 1.0 0.3 -0.1 0.4 0.2 0.1 2.9 2.0 1.7 5.9
Millwork (window, door, cabinet)* 1.1 0.2 0.0 0.4 0.1 0.1 2.5 1.5 1.2 7.1
Wood Window and Door Mfg. 1.4 0.3 -0.1 0.5 0.1 -0.1 1.8 0.5 0.3 9.8
Metal Window and Door Mfg. 0.1 -0.1 0.0 0.0 0.0 0.0 1.9 1.9 2.1 9.2
Laminated Plastics 0.3 -0.1 -0.1 0.0 -0.1 0.0 0.9 0.6 0.7 6.3
Nonresidential Electric Lighting Fixture Mfg. -0.1 0.4 -0.2 0.1 0.1 0.0 0.4 0.4 0.1 6.2
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data
NSA = Not seasonally adjusted, NA = Not Available
Source: Producer Price Index (PPI) – Bureau of Labor Statistics

Copper and Copper Products
Copper ores prices jumped 1.9% (NSA) in January following two months of sharp declines, including a 2.6% plunge in December. Prices were 2.0% lower than in January 2012, but were 11.0% higher than in January 2010.

Copper base scrap prices fell 0.4% (SA) in January after surging 2.0% in December. Prices were 1.2% higher than in January 2012 and were 14.5% higher than in January 2010.

Prices for copper and copper products rose 1.2% (NSA) in January following a 1.3% increase in December. Prices were up 0.6% from January 2012 and were up 5.7% from January 2010.

Copper and brass mill shapes prices advanced 0.6% in January after increasing 1.5% in December. Prices were up 2.9% from January 2012, but were down 2.1% from January 2010.

Other Metals
Steel mill products prices slipped 0.1% (NSA) in January after increasing 0.9% in December. Prices were down 8.3% from January 2012, but were up 12.9% from January 2010. Hot rolled bars, plates, and structural shapes prices rose 0.5% in January after jumping 1.6% in December. Nonetheless, prices were 9.8% lower than in January 2012, but were 15.0% higher than in January 2010.

Extruded aluminum rod, bar, and other shapes prices surged 3.4% (NSA) in January after declining 0.5% in December. Prices were up 0.7% from January 2012 and were up 5.6% from January 2010.

Series Changes
The index for “Wood Kitchen Cabinets” has been discontinued by the BLS. We have replaced it with the index for “Wood Kitchen Cabinet and Countertop Manufacturing.” We also added three more price indexes that are likely to be of interest to commercial builders, “Wood Window and Door Manufacturing,” “Metal Window and Door Manufacturing,” and “Nonresidential Electric Lighting Fixture Manufacturing.” The indexes appear in the table above.

Softwood Lumber and Gypsum
Demand for softwood lumber and gypsum products is largely determined by single-family housing construction activity. The improving single-family housing market has been pushing demand for these materials higher.

The PPI for softwood lumber rocketed up 6.7% (SA) in January after increasing a strong 2.1% in December and a robust 5.1% in November. Prices were 24.8% higher than in January 2012 and were 30.5% higher than in January 2010.

Canadian softwood lumber exports to the U.S. are regulated by the Softwood Lumber Agreement (SLA). Each month the level of exports permitted and any relevant export fees are determined by where the average price of softwood lumber over a specified four week period prior to that month falls within a four tier regime. The categories, from most restrictive to least restrictive and the related prices determining which category is in force for the month, are as follows.

  • The first category is for an average price of $315 per thousand board feet or lower
  • The second category is for an average price of $316 to $335
  • The third category is for an average price of $336 to $355
  • The fourth category is for on an average price of $356 or higher and eliminates all restrictions and fees on Canadian softwood lumber exports to the United States

There has been significant variation in the price of softwood lumber over the past several months. Increased single-family construction activity has been sufficient to drive prices for softwood lumber high enough to result in tier 4 — no restrictions on Canadian exports — for the first three months of the year. Reed Construction Data estimates that average prices that determine the relevant category for April have been high enough to ensure that no export restrictions will be in force for that month. The table below summarizes recent average prices and the resulting tier (category).

Average Prices to Determine
SLA Canadian Softwood Export Restrictions
2012 2013
November December January February March April
Average Price $326 $334 $357 $385 $395 $416*
Tier 2 2 4 4 4 4*
Source: Foreign Affairs and International Trade Canada

*Reed Construction Data estimate

In 2011, six gypsum producers sent letters indicating they would raise prices 35% in January 2012. But the December 2012 PPI was up less than half that amount (14.0%) from December 2011.

Although only partially successful with their 2012 price increase, last year several gypsum producers announced price increases of 25% to 30% effective at the beginning of this year. The early indications are that this time gypsum producers are recording some success. January gypsum prices jumped 11.8% and were 20.4% higher than in January 2012. Since January 2012 they were up 30.1%.

Outlook for Construction Materials Prices
The U.S. economy flattened in the fourth quarter of last year due to a few special circumstances, such as a sharp reduction in defense spending, that are not likely to be repeated. There are already indications that the first quarter of this year will report improved growth.

Meanwhile, the politicians are wrangling over how to resolve various budget issues even as sequestration began this month. It is estimated that if sequestration is left in place, it will lower real (inflation-adjusted) gross domestic product (GDP) growth by 0.5%, not healthy, but not a disaster either. Bigger threats are not enacting a federal government budget before the end of this month and expiration of the temporary federal debt ceiling in mid-May. Although nothing is certain in this political climate, it is likely that something will be done about both, if only extending the current deadlines. Recent reports that discussions are underway regarding these issues raise hope that a longer-term, more reasonable solution will be reached.

Europe has been muddling through its problems, although many European countries have fallen into recession. Slower growth in Europe is a drag on U.S. exports of construction machinery and products to Europe.

Despite these and other economic challenges, the Reed Construction Data forecast is that recession is avoided, the economy continues to grow at a moderate pace, and nonresidential construction activity will advance modestly this year and pick up speed next year. There will be moderate upward pressure on construction materials prices as some of the impediments to growth are removed or reduced. The outlook is for 2013 building materials prices inflation to proceed at roughly the same pace or a little faster than overall inflation.

If the U.S. economy outpaces our forecast of real (inflation-adjusted) gross domestic product (GDP) growth of 2.5% for the year, there will be greater construction activity and faster materials price inflation. Faster growth in the rest of the world would also mean higher construction materials prices. Significantly higher energy prices for a sustained period would contribute to a faster rate of increase in building materials prices, but would also be a drag on economic growth, eventually hurting construction activity and limiting building materials price increases.

My Top 2 Stocks: Caterpillar and Oracle

By Nichole Seghetti

This month, we Fools are discussing our top two stock holdings. Today I’ll address the reasons I bought my stocks, how they came to become my largest holdings, why I continue to hold them, and whether I still like the stocks for investors today.

Caterpillar (NYSE: CAT )
Roughly one-third of the world’s population lived in urban areas in 1950, and more than half of us currently inhabit cities. By 2030, cities and towns of the developing world will make up 80% of urban humanity. Urbanization is fueling demand for the building blocks of modern society. As a result, we’ll need more natural resources, like metals and materials, to build everything from power lines to buildings. And, in order to build out infrastructure, earthmoving and construction will be required.

I bought Caterpillar and metals and mining conglomerate BHP Billiton (NYSE: BBL ) to potentially profit from this trend. I bought Caterpillar, in particular, for both its product and geographic diversification. As the world’s largest manufacturer of earthmoving, construction, and mining equipment, the company derives nearly 60% of sales internationally.

Emerging markets account for a decent slice of Caterpillar’s sales today, and they’ll likely become a much larger part of revenues over the long term. Caterpillar will benefit from a continued rebound in the U.S. housing market, and its purchase of mining equipment maker Bucyrus sets it up nicely for growth long term.

I bought both Caterpillar and BHP Billiton in the midst of the financial crisis, as the construction and building industry was coming to a screeching halt. From the time I bought Caterpillar in 2009, it’s grown more than 33% on average annually and has become one of my largest holdings. While I expect Caterpillar to experience short-term headwinds, especially as growth in developing markets slows and demand for commodities cools off, I’m in it for the long haul. And I still like the stock for investors looking to get in today.

Oracle (NASDAQ: ORCL )
The first tech stock I ever bought was Applied Materials (NASDAQ: AMAT ) . I had just graduated from college, was living in Northern California, and had a close friend who worked at the Silicon Valley semiconductor equipment maker. I had a bit of success with Applied stock and thought I’d dabble into more tech stocks.

I bought Oracle in 1998. The world’s second largest software company and the leading provider of software for information management, Oracle’s competitive advantages are its recurring revenue business model, high customer retention, and synergies from acquisitions.

Oracle’s solid long-term track record is largely thanks to founder and CEO Larry Ellison. He adheres to a philosophy of being either No. 1 or No. 2 in a market. If the company can’t achieve that, it’ll either exit the market altogether or leverage its strong balance sheet to acquire a company that will help it get to a market-leading position.

As a result, Oracle has completed billions of dollars in acquisitions during the past few years. The company continually receives criticism for its spending spree. But I think most of the acquisitions have dovetailed nicely into the rest of the company’s products, augmented profits, and increased shareholder value.

For example, last month, Oracle announced it would acquire communications tech firm Acme Packet (NASDAQ: APKT ) , a leader in next-generation networks. With this acquisition, Oracle will complete a missing link of its overall solutions. Because the company offers an entire solution suite, it’s likely the newly acquired customers will add even more of Oracle’s software and services.

I rode Oracle through the tech bubble, suffered through the tech bust, and have held on to it ever since. While the stock has brought on a few headaches over the years, I believed in its long-term prospects. And I like the direction Oracle seems to be heading in. From the time I bought the stock nearly 15 years ago, it’s returned 17% on average annually. It pays to buy and hold, even when holding is tough to do.

Foolish bottom line
In addition to being leaders in their respective fields, these industry titans enjoy enormous scale and true staying power. Both Caterpillar and Oracle remain companies that I like for investors today and that I intend to hold for many years.

Caterpillar and Oracle are my top two stock holdings, but our co-founder Tom Gardner recently revealed his top two stocks as well. For the names of that surprising pair of companies, just click here.

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March 7, 2013

Posted by nahetsblog on March 7, 2013

GE Races Caterpillar on LNG Trains to Curb Buffett Cost

By Tim Catts – Mar 6, 2013 9:01 PM PT

General Electric Co. (GE) and Caterpillar Inc. (CAT), the world’s largest locomotive makers, are rushing to develop natural gas-powered models in a potential shift from diesel’s six decades as the fuel of choice for railroads.

Three of the biggest U.S. rail carriers — Berkshire Hathaway Inc. (BRK/A)’s Burlington Northern Santa Fe LLC, Union Pacific Corp. (UNP) and Norfolk Southern (NSC) Corp. — are working with manufacturers on using gas as an alternative power source for freight trains. CSX Corp. is studying the technology.

Tapping the nation’s glut of gas as a transportation power source opens a new front in the global competition between GE and Caterpillar. Liquefied natural gas holds the promise of cutting railroads’ costs, curbing greenhouse-gas emissions and ushering in the industry’s biggest change in fuel technology since diesel displaced steam in the 1950s.

“We are entering a new era where natural gas will be a major fuel,” Lorenzo Simonelli, chief executive officer of GE’s transportation unit, said in an interview. “If you believe the price advantage over diesel is going to stay here for the next 10 to 15 years, then LNG is a revolutionary fuel.”

Industrial goods such as locomotives and energy equipment are part of GE Chief Executive Officer Jeffrey Immelt’s push to emphasize manufacturing and shrink the finance unit, an initiative started after credit-market disruptions jeopardized the company. Caterpillar began its dedicated rail business with the 2006 acquisition of Progress Rail.

‘Tremendous Increase’

GE has more than tripled to $23.67 from a low of $6.66 during the financial crisis. The company’s stock now trades at premiums of 50 percent to Caterpillar and 2.5 percent to the Standard & Poor’s 500 Railroad Index, on a price-earnings basis. Caterpillar fell 0.6 percent to $89.64 yesterday in New York.

“In the last 12 months, there’s been a tremendous increase in activity around LNG within North America,” Simonelli said. “In the not-too-distant future, you’ll see some announcements being made about how we can apply LNG into a locomotive.”

Fuel trails only employee compensation among American railroads’ expenses, spurring a search for cheaper alternatives. Union Pacific, the largest U.S. railroad by revenue, burned 1.09 billion gallons of fuel last year at an average price of $3.22 a gallon, according to SEC filings.

LNG Switch

That’s significantly costlier than liquefied natural gas. It costs truckers $2.99 to buy LNG with the same energy content as a gallon of diesel at Clean Energy Fuels Corp. (CLNE)’s Port of Long Beach facility, the world’s largest LNG fueling station, said Gary Foster, the company’s spokesman. That’s before volume discounts that can reduce the price by as much as 30 percent, he said, meaning some customers pay as little as $2.10.

Railroads are turning to locomotive makers, including Fairfield, Connecticut-based GE and Peoria, Illinois-based Caterpillar, for engines that can help them take advantage of those savings.

“We’re spending some money on LNG to see if there’s an opportunity to switch from diesel,” Matt Rose, Burlington Northern’s CEO, said in an interview in January. “We’re working with both of our manufacturers as well as a bunch of suppliers on that.”

Warren Buffett, Berkshire’s billionaire CEO, said Burlington Northern will begin tests with natural gas locomotives this year during a March 4 interview on CNBC. Buffett bought the Fort Worth, Texas-based railroad for $27 billion three years ago in the largest acquisition of his career.

Customer Requests

“A lot of the customers have come to us seeking us to develop the technology,” William Ainsworth, CEO of Caterpillar’s Progress Rail Services unit said in a telephone interview. “They’ve already run models on the fuel savings. It’s not that we have to pitch the fuel savings. We’ve just got to get the technology right.”

Caterpillar, the world’s largest maker of diesel and natural gas engines, expects to run a pilot program in North America with a locomotive engine that uses a mix of diesel and natural gas later this year, Ainsworth said.

While the manufacturer has been in the natural gas-engine business for years, the company began focusing on technology for locomotives a little over a year ago, he said in a telephone interview.

Building an engine to run predominantly on liquefied natural gas with a smaller amount of diesel mixed in, a necessary step to maintain hauling power, is complex and the technology is in the “early development stage,” Tom Lange, a spokesman for Omaha, Nebraska-based Union Pacific, said in an e- mail.

Safety Standards

That hasn’t stopped the freight rail industry from exploring the ramifications of a move toward natural gas. Union Pacific is leading a task force put together by the Association of American Railroads that’s reviewing safety standards for special fuel cars that trains will need since LNG is less energy-dense than diesel. The panel is also studying ways to ensure LNG-powered locomotives can be used across all of the largest railroads’ networks.

“Union Pacific is exploring the potential to use LNG, but it’s still very much in the early analysis phase,” Lange said. “We are working closely with locomotive and engine manufacturers, cryogenic fuel-tank suppliers and natural gas/LNG suppliers to complete our analysis.”

Logistical Hurdle

CSX (CSX), the largest railroad operating primarily in the eastern U.S., is “open to this technology and believe it is potentially viable but there’s still a lot of work to be done,” Kristin Seay, a spokeswoman for the Jacksonville, Florida-based company, said in an e-mail.

Norfolk Southern is working with locomotive manufacturers and studying compressed natural gas-powered engines in addition to LNG, said Robin Chapman, a spokesman for the Norfolk, Virginia-based railroad.

In addition to the technological challenge of developing a locomotive that can run on natural gas, the rail industry also faces the logistical hurdle of bringing the fuel to its networks, said Paul Bingham, an economist at CDM Smith, an Arlington, Virginia-based consulting firm.

“The Class 1 rails will make the investment and put in the fueling systems, but they still have to get the gas to those locations,” Bingham said in a telephone interview. “Some other third party is going to have to play in that.”

That may provide another opportunity for GE, which makes equipment it says can liquefy natural gas at any point along a distribution network. GE sold two of the so-called MicroLNG units to Seal Beach, California-based Clean Energy Fuels last year to help create a coast-to-coast network of LNG fueling stations for trucks.

“Like the move from steam to diesel, if it’s going to be that radical a transformation, that’s a lot of opportunity for sales in a lot of places,” Tony Hatch, an independent transportation consultant based in New York, said in a telephone interview.

BNSF Railway Working With Caterpillar, GE to Test Gas in Locomotives

By Jennifer Booton

Berkshire Hathaway’s (BRK.A) locomotive division, BNSF Railway, one of the world’s biggest consumers of diesel, confirmed Wednesday that it will undergo a pilot this year where its freight trains will use natural gas rather than diesel.

It’s a move BNSF Railway CEO Matthew Rose said will allow the company to evaluate the “technical and economic viability” of natural gas, which he said could serve to lower locomotive fuel costs.

“The use of liquefied natural gas as an alternative fuel is a potential transformational change for our railroad and for our industry," Rose said.

BNSF has been working with locomotive manufacturers General Electric (GE) and Caterpillar’s (CAT) EMD unit to develop the natural gas engine technology that will be used for the pilot.

The company still has to overcome technical and regulatory challenges, however Rose said the pilot nevertheless marks an important step in the transition to liquefied natural gas in through-freight service, potentially reducing fuel costs and greenhouse gases.

Oil has long been the primary source of fuel for jets and trains, yet the switch by BNSF may serve to lower diesel’s dominance in transportation. Improved technologies have boosted gas reserves, lowering the price of gas and making it a much more fiscally attractive compared with its costly oil counterpart.

BNSF, a division of Warren Buffett’s Berkshire Hathaway, plans to pilot the use of gas to operate its massive portfolio of freight locomotives, responsible for shipping anything from Boeing (BA) aircraft parts to crude oil.

In an interview with The Wall Street Journal, Rose said the freight train sector has not seen such a historic transition since it shifted from stream engines.


3 Downside Risks That Investors Should Not Gloss Over With Caterpillar

Caterpillar, Inc. (CAT) seems to be a very popular stock and it is easy to see why, when this company makes some of the coolest earthmoving equipment in the world. Caterpillar equipment is used in many industries which includes construction, farming, mining, heavy infrastructure, and others. Because of this, Caterpillar is dependent on the health of the global economy. While this company has a great brand name and it manufactures very high quality products, it seems that some investors "gloss over" the challenges and potential risks that should be considered more thoroughly. Here is a look at some of these potential risk factors:

1) Caterpillar makes heavy machinery that is often used in the coal industry and in the mining of precious and other metals, such as iron ore. The coal industry is facing major challenges as the price of coal has plunged due to increased use of natural gas by many utilities. Demand for coal and iron ore (which is used to make steel) from China has been weak as well, and this dynamic could persist or even get worse as fears over a property bubble in China linger. With precious metals prices facing a decline recently, expansion plans at many companies might be put on hold and lower demand for mining equipment.

2) Even though the U.S. economy is seeing some bright spots in areas like housing, that may not be enough to outweigh a number of very serious potential challenges that the economy is facing. The United States could easily slip back into a recession, especially as a 2% payroll tax increase that was introduced in January starts to bite into consumer spending. Additionally, the recent "Sequestration" budget cuts could impact a number of major industries and even cause layoffs or work furloughs for certain government employees. The impact of these budget cuts might trickle into the general economy over the next few months.

3) Many global macro economic issues remain and any one of these could create a major financial crisis or a double dip recession. The economy in Europe remains weak and many countries are faced with very high unemployment. Spain and Greece are facing unemployment rates of over 20%, and other countries like France are seeing these numbers trending in the wrong direction. While Europe seemed to be back in control of a debt crisis in recent weeks, election results in Italy has now reminded investors how fragile the current situation remains. The concern is that if Italy votes in the wrong leaders who want to push back against austerity measures, it could lead to a chain of events that causes Italy to leave the European Union and the Euro currency and possibly lead to Spain leaving as well. This type of event could create a financial crisis that is not priced into the market now as the S&P 500 Index (SPY) trades near all time highs.

Caterpillar opens ME parts distribution center

US-based Caterpillar, a leading manufacturer of construction and mining equipment, today opened its new parts distribution center in Dubai.

The 500,000 sq ft Middle East Distribution Center (MEDC) employs 130 people and will further strengthen aftermarket parts support in the East-Africa and Middle East region.

The facility will also serve as a regional office for employees from other Caterpillar service groups. The Middle East Distribution Center joins four distribution centers in the US.

In addition, construction is underway for new distribution centers in Queensland, Australia, and San Luis Potosi, Mexico.

“We are very pleased to be adding the Middle-East Distribution Center to our industry leading global parts network," said Steve Larson, Caterpillar vice president with responsibility for parts distribution and logistics, and president of Caterpillar Logistics Services.

“With the outstanding product support capability of Cat dealers in the region and the improved parts availability this operation will deliver, we will continue providing customers an unmatched level of after-sale support.”

The Middle East Distribution Center will increase total warehouse capacity for the Europe, Africa and Middle East (EAME) network, adding to existing Distribution Centers in Grimbergen, Johannesburg and Moscow.

“We are excited about our overall growth opportunities in the Middle East and Africa markets and, along with our dealers, are investing in expanding our facilities,” said Nigel Lewis, Caterpillar vice president with responsibility for EAME Distribution.

“The Middle-East Distribution Center is the first of a number of investments we are making in the region that will allow us to improve parts and components availability and the delivery process to our dealers and customers."

The facility will also contribute to Caterpillar’s sustainable development goals by reducing airfreight for parts ordered in the region.

“We are delighted to be a part of the opening of Caterpillar’s new Parts Distribution Center in Jafza. Caterpillar’s expansion underlines the company’s vision and commitment to the region. We are sure the new facility will enable them to further strengthen Caterpillar’s strong presence in the region. We wish them great successes and growth in the Middle East,” said Salma Ali Saif Bin Hareb, chief commercial officer of Economic Zones World & Jafza.

The Middle East Distribution Center is an important part of Caterpillar’s overall plan to enhance the global Cat Parts distribution network and get parts to dealers and customers faster. – TradeArabia News Service

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