The Department of Homeland Security has made plans for a wall on the Mexican border a little more concrete.
The agency recently posted a notice that it would be soliciting for the design and build of wall prototypes along the border. A few days later, it updated the notice to let companies know that the agency anticipates “procuring concrete wall structures, nominally 30 feet tall, that will meet requirements for aesthetics, anti-climbing and resistance to tampering or damage,” according to the posting on the General Services Administration website.
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“All of this is suddenly becoming a lot more real,” says Craig Bibb, analyst with CJS Securities in White Plains, New York.
While it is too soon to know for sure what the completed wall will entail, it is expected to be a boon for producers of concrete, cement and aggregates. Aggregates are course material such as sand, gravel or crushed stone used in construction and as an ingredient in concrete along with water and cement.
Cemex SAB (ticker: CX) is likely the best-positioned company — Mexican or U.S. — to take advantage of demand for materials for the wall, analysts say. Of the public companies likely to benefit from the border wall, the Mexican company has the most concrete assets closest to the border.
Grupo Cementos de Chihuahua, which trades on the Mexican Stock Exchange, would also benefit from the wall’s construction, says Longbow Research analyst Garik Shmois.
Even if Cemex doesn’t bid directly on projects, American companies that win construction contracts will probably source materials from the Mexican company, as well as Martin Marietta Materials ( MLM) and Vulcan Materials Co. ( VMC), says Kathryn Thompson, CEO of Thompson Research Group.
The main U.S.-based publicly traded construction materials companies that stand to benefit from the wall are Martin Marietta, Vulcan, U.S. Concrete ( USCR), Granite Construction ( GVA), Eagle Materials ( EXP) and Summit Materials ( SUM), analysts say.
Aside from Cemex, Shmois thinks Vulcan would stand to benefit the most in California, and it is a major player in Arizona.
Vulcan also has New Mexico operations in the Albuquerque area, so that state’s portion of the wall may end up being serviced by smaller private companies, Shmois says.
In Texas, all of the companies have their fair share of exposure, Shmois says. Eagle and Martin Marietta would benefit from cement demand, and U.S. Concrete would benefit from concrete demand. Summit could also be a concrete supplier, with Martin Marietta coming in third on concrete, he says.
Thompson says she doubts there will be one monolithic concrete wall across the entire border. “It’s not going to look like the Great Wall of China or the Berlin Wall,” she says.
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But regardless of how much of the wall is concrete, metal or other material, the foundation will have to utilize aggregates, concrete and cement, Thompson says.
It would make sense to have some portions — such as near the Texas cities of Laredo and El Paso — to have a concrete wall for symbolism, but for other parts to have fencing and others to be a virtual wall with cameras, Shmois says.
If the wall winds up being fully concrete and spans the entire border, that would add around 2 percent to annual U.S. industry volume growth, and the U.S. market would be fully sold out of cement by late 2018, Shmois says.
But more importantly, the markets for these construction materials are already nearly sold out, he says. So prices for these already limited materials would rise and boost the margins for these companies, he says.
Thompson notes that as big of a project as the border wall is, construction materials companies have bigger sources of revenue from state road contracts, and from commercial and nonresidential real estate projects such as hospitals, schools and water infrastructure that may be on the horizon from President Donald Trump’s push for more infrastructure spending.
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Because the construction materials are heavy, distance will be the driving factor for costs, Shmois says. Companies with assets closer to the border will be more competitive because of transportation costs, he says.
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8 Companies That Can Profit From a Border Wall With Mexico originally appeared on usnews.com
