October 21, 2014

Construction and Mining

John M. Dunn | 1/1/1996
Let others flock to the fabled service economy. These Florida workers are content to earn their living the old-fashioned way -- with their hands. And why not? At last count, some 315,100 construction and mining employees have something to be thankful for: steady jobs.

Not that it's easy. A jumble of problems from irksome government regulations, growth management plans, hurricanes, fluctuating interest rates and even societal upheaval abroad continue to vex builders and miners. Despite these challenges, prospects for 1996 look better for both industries than they did just a few years ago.

In-migration, of course, is the lifeblood of construction. Although the 1.9% population growth projected for 1996 may dip slightly next year, say University of Florida economists, it will spur new residential starts on into 1997.

Housing Starts
In fact, Dan Mercer, research economist for the National Association of Home Builders in Washington, D.C., forecasts 133,300 new housing starts in Florida for 1996 -- a figure that would mean the state remains the nation's leader.

Expect Tampa, Orlando and Florida's Southwest to lead the pack in housing starts for the next three years, says Jacksonville-based researcher, David F. Parker. But that doesn't mean construction is lackluster elsewhere. Even before Hurricane Opal trashed the Panhandle and created new business for builders, public construction activity was at full gallop. "Things look good for the next year or so thanks to $300 million worth of construction work for a new training facility started early last year at the Pensacola Naval Air Station," says Mike Gerescher, an executive vice president in Florida for Associated General Contractors.

Public construction is holding its own, agrees Bruce Kershner, executive director for the Underground Utility Contractors of Florida in Lakeland. "But what's improving for us is private development. New demand is taking up the slack which resulted in some overbuilding in recent years. Things are looking especially good in Jacksonville and Orlando."

A new appreciation for uncluttered landscapes and economic savings is driving contractors to place utilities underground. Explains Luther Boone, construction operations manager in Apopka for Florida Power Corporation, "Ninety percent of the utilities for new construction in central Florida -- where developers do at least 200- to 300-acre projects -- is going underground." Utilities for Disney's new Celebration City, he says, will be totally subterranean.

Commercial Construction
New commercial construction, though, is somewhat spotty. In Fort Lauderdale, the Construction Association of South Florida projected that Palm Beach County would increase its commercial construction in 1995 by 70% -- or $100 million -- over the previous year. Broward and Dade counties, meanwhile, were anticipated to decline by 28% and 12% respectively.

Being busy, though, doesn't always translate into greater profits, as Barry Rutenberg, a Gainesville builder and vice president in Florida for the National Association of Home Builders, points out. "I've talked to people in every one of our 29 locals and they all say profitability is down," he says. "Nobody is making as much money as they did 20 years ago."

Though nobody knows for sure, some industry observers think 4.4% represents an average profit margin for home builders across Florida. What's hurting profits are time-consuming environmental regulations, rising material costs and a trend toward a consolidation of suppliers. New hurricane codes that boosted some new home prices in Dade County as much as 15% may jack up housing costs everywhere if such regulations are imposed statewide.

Complains Rutenberg, "If some of these proposals go through, builders in landlocked Gainesville will have to install windows that can withstand windblown debris at 130 mph for three seconds."

Another trend is making contractors grumpy. Carpenters and masons -- tradesmen of all kinds -- are in short supply everywhere. "It's not uncommon here in South Florida to see signs posted at construction sites saying, 'Labor Wanted; Need Carpenters!,'" reports James Woodall, Associated General Contractors' (AGC) executive manager for Dade, Broward and Monroe counties.

Construction's blue-collar aura may explain why many young workers avoid construction work. In addition, say contractors, many workers laid off during the last recession left construction for good.

For whatever reason, contractors expect the labor shortage to drive up wages. "In fact, some contractors in the private sector here in Pensacola are holding back until the supply of labor is more favorable," says Mike Gerescher, the AGC vice president.

Many trade associations are concerned. That's why they are sponsoring new apprenticeship programs in Miami, Pensacola, Tampa, Fort Myers and Naples to train hundreds of new workers. "This," says one industry analyst, "is what unions used to do."

Meanwhile, the Florida Department of Transportation plans to spend $1.043 billion on new roads and bridges in 1996 -- a figure that exceeds the average $900 million spent annually over the past five years. "And if all goes well in Washington, another $180 million could make its way into Florida for work on the Fuller Warren Bridge on I-95 in Jacksonville," says Bob Burleson, president of the Florida Transportation Builders' Association in Tallahassee.

But other entities are also funding roadwork, especially in central Florida. "Our company does a lot of roadwork for cities, counties and Disney," says Jean-Marc Allard, president, chairman and CEO of Hubbard Construction in Winter Park, Florida's number one heavy construction contractor. All things considered, he says, "Brand-new roadwork probably makes up 60% of all roadwork in Florida." Allard expects his own company -- which does $200 million in road building every year -- to increase its work force from 1,000 to possibly 1,300 during the year.

As the construction industry rises from the doldrums, so too are the mining companies that supply the sand, crushed stone and aggregate needed for bridges, bypasses and concrete structures.

Give DOT credit for the turnaround. Add to that dropping interest rates. "In 1991 our business fell off the cliff into a terrible recession," recounts John Baker, president of Jacksonville-based Florida Rock Industries. "But then in 1993 we began to have a rebound."

Employment levels, though, lagged during the recovery. At Florida Rock, one of the largest crushed stone operations in the state, the work force dropped from about 3,500 in 1989 to its current level of 2,250, thanks largely to automation and belt-tightening efforts.

Despite their guarded optimism, Florida's crushed rock producers have at least one thing to fret about -- foreign competition from mines on the Yucatan Peninsula.

Florida's other major mining enterprise, the phosphate industry, also faces growing challenges from abroad -- in this case the Middle East. But then again, these producers, who supply about 25% of the world's phosphate needs, have also enjoyed foreign consumption of their products. India, China and Russia have kept the state's phosphate producers happy for years. But during economic turmoil following the breakup of the Soviet Union, a desperate need for cash turned Russia into an exporter, rather than an importer, of phosphate-based fertilizers. Russia's turnaround sent Florida's phosphate production into a nosedive in 1993.

The worst may be over. "Today there's a strong recovery," says Mike Rahm, a senior economist for Cargill Fertilizer, which is based in Minneapolis with Florida operations in Bartow and Tampa. "This market looks bullish to us for the next one to two years. It's being fueled by a resurgence of foreign demand, led by China which has a growing economy and an increasing population with a need for protein." India too looks good, he says.

"Last year was a banner year," effuses Merle Farris, vice president of operations at Farmland Hydro, L.P., located near Bartow. "We're looking to next year to be just as good. Demand is strong from China and, increasingly, Brazil and other parts of South America. And last spring's weather-related problems in the Midwest caused grain reserves to drop. We're sold out."

Although, employment throughout the phosphate industry should remain steady through 1996, "The long-term forecast for the state from 1992 to 2005 calls for a loss of 746 jobs -- a 10.52% decrease -- in mining," predicts Kevin Brickey, an economist for the Florida Department of Labor. "What's going on within the industry is consolidation as well as increased capital investment to reduce labor needs."

Recently, for example, Potash Corporation of Saskatchewan purchased Occidental Chemical's phosphate operations in White Springs. Meanwhile, Cargill intends to buy Mobil Mining and Mineral Company's South Fort Meade mine. Says Farmland Hydro's Merle Farris, "When I moved here in 1981, there were about 13 companies, all but two or three were involved in mining. Now there are only seven members of the Phosphate Council, and only four will be left mining."

Something else is also transforming the industry. Certain deposits in Polk County -- Florida's phosphate heartland -- are expected to be mined out within a decade. In fact, some analysts even wonder if the present supply of phosphate in Florida will be used up within 25 years.

No matter. If that happens, Florida will still have a phosphate industry, but one dependent on imports. And it will be one even more geared to producing fertilizer, animal feed supplements and other phosphate products than it is now.

That trend is already under way. "The attitude about our industry is changing; we don't think of ourselves as miners anymore," says A.L. Holmes, vice president, phosphate operations, CF Industries in Bartow. "Instead we talk about being in the fertilizer and chemical business."

And that, too, is hands-on work.

Tags: Florida Small Business, Politics & Law, Business Florida

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