With the industry on track for a peak-to-trough cement consumption decline of 45 million metric tons (mt) in 2007 (-10 percent), 2008 (-15 percent) and 2009 (trending -17 percent) figures–the worst in U.S. history–2010 shipments are expected to hit 83 million mt, reflecting a stabilizing economy and employment uptick
Sources: Portland Cement Association, Skokie, Ill.; CP staff
With the industry on track for a peak-to-trough cement consumption decline of 45 million metric tons (mt) in 2007 (-10 percent), 2008 (-15 percent) and 2009 (trending -17 percent) figures–the worst in U.S. history–2010 shipments are expected to hit 83 million mt, reflecting a stabilizing economy and employment uptick. According to PCA Chief Economist Ed Sullivan’s revised forecast, stimulus program-related spending and a better overall economy in the back half of 2009 will see cement consumption and concrete output negatives concentrated during the first half. Still, this year’s projected 17 percent drop is far more severe than the 8.6 percent decrease Sullivan originally forecast in February 2009 amid the stimulus package passage. On the plus side, Sullivan’s latest 2010 market expectations (cement consumption +7 percent) surpass the 5.3 percent growth he anticipated earlier this year.
In addition, Sullivan expects housing starts to stabilize in the second half of 2010, although nonresidential construction, which he expects to drop more than 27 percent in 2009, will continue to decline next year. Weakness in near-term cement consumption will stem largely from declines in the private sector in residential and nonresidential construction, he said. By the second half of 2010, stimulus spending should enter a phase that includes more traditional infrastructure projects that carry higher cement intensities.
The potential for a cement consumption spike in 2011 could be amplified by timely enactment of a new surface transportation law to succeed SAFETEA, which sunsets September 30, 2009. With the Obama administration’s stated commitment to infrastructure improvement, and likelihood that unemployment remains high, a large increase in federal road and transit spending is expected, potentially boosting 2011 cement consumption to 97 million mt. Unemployment is expected to peak during the first quarter of 2010 to levels in excess of 10 percent, Sullivan affirms. This will lead to public sentiment for additional stimulus and more traditional, job-generating infrastructure spending. This suggests a significant increase in funding for the next transportation bill, possibly 40 percent.