Early July, the Census Bureau reported that construction spending fell 2.1% in May, marking the third straight month of declines. Spending fell 0.3% in March and 3.5% in April. It is down almost $85 billion on an annualized basis since February. In an environment that could adapt to social distancing better than others it's tough to see this national trend. Experts anticipate a solid rebound due to low-interest rates and ample bank reserves but say the final determination may be families and consumer spending. This group has had to pullback which has resulted in investment cuts.
GNDC caught up with Curt Kittelson, General Manager at Fisher Industries in Dickinson. Fisher Industries is a family of businesses that encompass all aspects of the aggregate production and heavy civil construction industries. We wanted to hear from them about what's happening on the construction scene specific to local and national trends and how outside forces, such as oil impacts or trade wars, and COVID19 were impacting their organization's success.
GNDC: Tell us about the trends you are seeing with construction projects this year? Kittelson: That depends a lot on where in the nation the project is. Our manufacturing company does a lot of business on the East Coast of the United States. We have agents there who promote our products. There have been many inquiries, but many of the projects out there have been put on hold, especially in the Pennsylvania area. Projects in the Midwest and West are still going. In North Dakota, NDDOT determined that they were not going to shut down any projects. Rather they made it clear that we needed to maintain social distancing and implement other safety measures out in the field. So, it has been very busy here. There is a nice load of work in what we call our northern operations which is the Dakotas, Montana, and Wyoming. The spring and early summer have been good for us.
How does ND compare to other states in the nation?
Even with the slowdown in the oil industry and the loss of tax revenue that goes with that, there is still a fair amount of work to maintain the roads in the western part of our state. There is a lot of work in our Arizona market, even with their higher incidence of coronavirus. In New Mexico, we have a nice backlog of work and there are some big bid lettings coming out soon. We have seen some slowdowns in work we are doing in California and Nevada, although we did receive a large contract in Las Vegas a couple of months ago and that project is starting. North Dakota operations [beyond constructions] are busy. In our manufacturing shop, we are at the max. We have work that will keep us busy through the rest of this year.
Has the USMCA or the Chinese Trade War impacted your business, specifically your aggregate processing equipment distribution?
We have agents around the world including Europe, the Middle East, South Africa, China, and Australia. Even in the last couple years, those markets have been fairly slow. That is due, in part, to the strength of the US dollar compared to foreign currency. That makes it expensive for them to buy a piece of equipment from us. Where we have really seen this become an issue is in products that we buy from vendors around the world, China for instance. We get some conveyor belts out of Germany and we have seen delays with those. They say they will have them to us in eight or nine weeks and they are taking anywhere from twelve to sixteen weeks. That is forcing us to look at our inventory levels. In some cases, we are having to overbuy to be safe. As I mentioned, we have enough work to keep us busy through the end of the year, so we can’t afford to be unable to work because we don’t have a replacement part on hand. Early in the trade war, we saw some escalation in prices but those seem to have settled down a bit. This is especially true in the steel industry. Lately, we have seen stabilization and even drops in prices. The news tells us that there is a trade war with China, and then they say it is getting resolved and then the next day there is a trade war with China. It seems to go back and forth pretty regularly, but it really has not affected us too much.
You mentioned having agents all over the world. Where do you sell the majority of your equipment?
We are doing fairly well in Canada. We have had a number of inquiries in the last thirty days out of the Middle East. I was also trading emails in the last couple of days with our agent in Australia. Our US customers are very good for us right now. Specifically, the East Coast of the US has been great for us lately.
What challenges are you seeing specific to COVID-19?
With the work that we do, the biggest challenge for us is trying to maintain social distancing. Initially, it was a struggle to get hand sanitizer, disinfectants, and other cleaning supplies that we needed. We try to run our operations as lean as we can, so people in the field are multi-tasking. They might be running a loader one hour, the next hour they are on a dozer, then the next they might be running the crushing plant. Because of that, we have to make sure that we keep all of those things clean and protected. As a company, we have been fortunate. We have almost 1400 employees, and we have been really blessed because I think we have only had one positive case so far. Even in the manufacturing shop, we are careful to maintain social distancing. We were fortunate to be categorized as an essential business, but that meant that we needed to take steps to keep our people safe. We have put policies in place to make decisions about employees who may have had contact with someone who has COVID-19. The guidelines that have been shared have allowed us to make decisions to keep people safe, but also keep our operations going. Our human resources department is tracking CDC guidelines that are constantly changing, ensuring incorporation into what we do. Early in this, some of the people in administrative positions who were able to work from home did so. We kept our parts room open, but customers called ahead and let us know what they needed so we could prepare for quick pick up. In some cases, we left it outside for them. We made a lot of adjustments. Some of them may be things we continue to do.
Are there any projects you are working on this summer that you would like to tell us about?
We have a nice backlog in all our divisions right now. In General Steel, there is about a 20,000-hour backlog. That includes a big conveying project in Michigan that we are just finishing. From there we will go right into another project for a sugar company in Eastern North Dakota. Other operations are busy too. There is a project on the beltway bypass on I-215 on the north side of Las Vegas that is just getting underway. That one will last a couple of years, and we are excited to be part of the contract. There are a couple of other nice road construction projects in New Mexico. Down south, we do a lot more prime contracting where we take on the whole project. Up in North Dakota, we work more as a subcontractor doing the crushing of the aggregates and selling it to the prime contractor. Another really interesting job we have is in the city of Phoenix, on the north side of I-17. They are putting what they call an "arch pipe" for flood drainage. We have to excavate, set the pipe in the ground, and then fill a concrete slurry around it to hold it in place. The challenge in that project is the space that we have to work in. It is a small footprint for the work that has to be done. At this point, it is going well. Here at General Steel, we have made a few pieces that we have sent down to help them. There is some big mine work in Arizona. We got into a contract with one of the coal mines near Gillette, Wyoming. We are crushing scoria for their roads. We are always looking for new business. We have opened some new crushing plants in Texas, and we are getting a nice backlog of work there.
Is there anything that I didn’t ask that you would like to talk about?
We certainly appreciate the opportunity to talk a little bit about Fisher Industries. We are fortunate that our corporate headquarters is in Western North Dakota and proud to say we are a North Dakota company. We are proud to partner with the GNDC. Fisher is in its second generation of ownership right now and the third generation is coming up and getting heavily involved in the company. Tommy Fisher’s sons have both graduated from college and are learning the business from the ground up. With those two coming up and showing their excitement for the business, we see a bright future. Through that we plan to stay true to our North Dakota roots and show the work ethic that we are known for. We like to say we like the tough jobs. We love a challenge.