Aggregates Outlook Predicts Expansion in 2000, But a Slowdown in 2001; Soft housing market impacts industry.

Business Editors

LIVINGSTON, N.J.--(BUSINESS WIRE)--July 24, 2000

Although a strong economy and robust construction market will continue to drive growth within the aggregates mining industry during 2000, production is expected to level off in 2001 according to CIT Equipment Financing's 5th Annual Aggregates Mining Outlook.

The Outlook was published this month by CIT Equipment Financing, a leading lender to the aggregates and construction industries, and predicts that in 2000, aggregates production will expand 2.7 percent to a record 2.99 billion short tons, while in 2001 production will essentially remain the same, experiencing only a slight increase of 0.1 percent. In 1999 aggregate production broke a record for the seventh consecutive year by expanding 2.7 percent to 2.93 billion short tons.

"As has always been the case, aggregates growth is closely aligned to construction growth," said Michael Paslawskyj, vice president of economic research at CIT. "Consequently, as some sectors of the construction industry begin to level off in 2001 so will expansion within the aggregates market."

Construction strong, but housing softens

The Outlook predicts that construction will continue to expand and in 2000 set an all-time record with total activity reaching $564 billion. Of the three industry segments residential housing expenditures will lead the way with spending rising to a record $253 billion in 2000 but then dropping to $248 billion in 2001. "With mortgage rates up sharply, the segment is beginning to exhibit some softness," says Paslawskyj. "We expect housing starts to move down to 1.635 million units in 2000 and then to 1.540 million units in 2001."

Paslawskyj believes that private non-residential construction spending will rise to $186 billion in 2001 or 6.2 percent above 1999, while public works spending (i.e. highway and public building construction) will increase to a record $133 billion in 2001 or 4.6 percent above last year's level.

Segment breakdown

Of the two aggregate sub-segments, both are expected to perform similarly with sand and gravel production rising 2.2 percent in 2000 to a record 1.24 billion short tons, while crushed stone production will increase 1.7 percent to a record 1.75 billion short tons. Due to a slow down in residential construction both segments are expected to level off in 2001. "A cooling of the aggregates market in 2001 should not be viewed negatively," says Paslawskyj. "On the contrary, it should be viewed from a `glass is half full' perspective. In other words, although growth will begin to slow, it will still remain at record levels."

According to the Outlook, aggregate prices and productivity have also increased, with sand and gravel reaching a record $4.26 a short ton in 1999 and production hitting a record 33,624 short tons per employee during the same period. Likewise, crushed stone prices came in at $5.02 a short ton in 1999 - the second highest on record - and production reached a new high of 40,156 short tons per employee during the same period.

CIT Equipment Financing offers companies a wide variety of financial solutions including equipment leasing and financing, loans for commercial real estate, construction financing, franchise financing, and Small Business Administration loans. It is a unit of The CIT Group (NYSE: CIT, TSE: CIT.U). With $53 billion in managed assets, The CIT Group (www.cit.com) is one of the nation's largest commercial and consumer finance organizations.

For a complete copy of the 5th Annual Aggregates Mining Outlook, please contact Ann-Margret Crater, vice president of public relations at [phone] or [e-mail].