Concrete Industry Business Outlook, 2008

This new year brings known and unknown factors driving construction materials production and demand. Producers and contractors across the board acknowledge


This new year brings known and unknown factors driving construction materials production and demand. Producers and contractors across the board acknowledge a lagging housing market that stands to keep concrete output 10 percent below 2006 peaks, based on Portland Cement Association-projected 2008 cement consumption. Other potential negatives and positives looming this year:


The presidential race will be critical for businesses subject to environmental regulation and prone to OSHA oversight. Election of a Democrat to the White House, coupled with a likely Democrat-controlled Congress, would surely augment a tighter regulatory environment for plant operations, plus a push for carbon dioxide emission reduction and U.S. participation in a post-Kyoto Protocol treaty aimed at curtailing climate change. The cap-and-trade strategy behind Democrats’ CO2 emissions reduction measures would hit carbon-intensive cement production, almost assuredly raising powder prices even beyond recent trends.

Mega-deal assimilation

Cemex-Rinker, HeidelbergCement-Hanson, Vulcan Materials-Florida Rock ÷ A fourth takeover, Lafarge-Orascom, capped a highly fluid 2007 for global heavy building materials. Paris-based Lafarge S.A., the world’s top cement producer, and Egyptian mogul Nassef Sawiris announced an early December deal that would significantly boost the French company’s position in the emerging Middle Eastern construction market and give Sawiris expanded foothold in the worldwide cement industry. In a transaction scheduled to close first quarter, Lafarge will purchase Cairo-based Orascom Cement, of which Sawiris is CEO and whose family holds a 60 percent stake, for $12.9 billion. In turn, Sawiris will receive newly issued Lafarge stock amounting to an 11.4 percent holding, plus two Lafarge board seats.

The combined companies would have 2008 revenues exceeding $25 billion, thus pacing Cemex ($23.5 billion) and HeidelbergCement ($22 billion). The Lafarge deal comes on the heels of Sawiris upping his stake in Dallas-based Texas Industries Inc. in June 2007 to 14.9 percent. A TXI investor since 2006, he has indicated that a possibile takeover is under discussion with TXI leadership. Also last June, Sawaris acquired a 9.7 percent stake in Martin Marietta Materials Inc., Raleigh, N.C.

Pipe & precast

It is unlikely 2008 deal-making in these markets will be confined to small operations. Hanson and Rinker brought their buyers the number one and two franchises, respectively, in U.S. concrete pipe and utility precast. Cemex’s planned exit from these markets has been delayed following a termination of talks with CRH/Oldcastle (note Scope, page 10) centering on Rinker’s Hydro Conduit assets. Those talks could resume amid a more positive economic outlook, especially for a housing-dependent market like concrete pipe. Since expediting a low-key takeover, Hanson’s suitor has made little indication of commitment to a dominant U.S. position in pipe & precast; however, those businesses are unique in the global HeidelbergCement portfolio.

Mega projects

The $7 billion City Center has been rising at a feverish clip along the Las Vegas Strip for more than two years, and will be among sites 2008 World of Concrete and ConExpo-Con/Agg attendees observe. Another job in that dollar league is finally taking shape in New York City, where the Freedom Tower at Ground Zero is rising (note page 14). Not lacking in structural steel members, the tower’s marquee element nevertheless is all concrete Û a core whose wall thickness at base levels exceeds five feet.

Commercial building projects of much more modest scale than City Center and Freedom Tower will continue to fuel 2008 material demand, offsetting declines in housing. In a visit to Wisconsin, we see how Carew Concrete (page 22) has mobilized production to supply turbine pedestals for wind farms. Higher-volume, niche targets may be on the radar, but these farms are appropriate to examine in this election-year January, where presidential campaign interests aren’t the only ones sticking their fingers in the wind.
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