Crushed Stone - Background

Background

Crushed stone is one of the most accessible natural resources, and is a major basic raw material used by construction, agriculture, and other industries. Despite the low value of its basic products, the crushed stone industry is a major contributor to and an indicator of the economic well-being of a nation. The demand for crushed stone is determined mostly by the level of construction activity, and, therefore, the demand for construction materials.

Stone resources of the world are very large. High-purity limestone and dolomite suitable for specialty uses are limited in many geographic areas. Crushed stone substitutes for roadbuilding include sand and gravel, and slag. Substitutes for crushed stone used as construction aggregates include sand and gravel, iron and steel slag, sintered or expanded clay or shale, and perlite or vermiculite.

Crushed stone is a high-volume, low-value commodity. The industry is highly competitive and is characterized by many operations serving local or regional markets. Production costs are determined mainly by the cost of labor, equipment, energy, and water, in addition to the costs of compliance with environmental and safety regulations. These costs vary depending on geographic location, the nature of the deposit, and the number and type of products produced. Despite having one of the lowest average by weight values of all mineral commodities, in the United States the constant dollar price of crushed stone has changed relatively little during a recent 20 year period. As a result of rising costs of labor, energy, and mining and processing equipment, the average unit price of crushed stone increased from US$1.58 per metric ton, f.o.b. plant, in 1970 to US$4.39 in 1990. However, the unit price in constant 1982 dollars fluctuated between US$3.48 and US$3.91 per metric ton for the same period. Increased productivity achieved through increased use of automation and more efficient equipment was mainly responsible for maintaining the prices at this level.

Transportation is a major factor in the delivered price of crushed stone. The cost of moving crushed stone from the plant to the market often equals or exceeds the sale price of the product at the plant. Because of the high cost of transportation and the large quantities of bulk material that have to be shipped, crushed stone is usually marketed locally. The high cost of transportation is responsible for the wide dispersion of quarries, usually located near highly populated areas. However, increasing land values combined with local environmental concerns are moving crushed stone quarries farther from the end-use locations, increasing the price of delivered material. Economies of scale, which might be realized if fewer, larger operations served larger marketing areas, would probably not offset the increased transportation costs.