Sources: Portland Cement Association, Washington, D.C.; CP staff
Thirteen months after pandemic panic and profound economic uncertainty compelled a guarded one- to three-year outlook for U.S. construction activity, the Portland Cement Association Market Intelligence Group reports that a key indicator of building and nonbuilding project volume grew year over year—a trend likely to continue in 2021 and 2022.
“U.S. cement consumption recorded 2 percent growth during 2020,” says PCA Chief Economist Ed Sullivan, reflecting on internal and just-released U.S. Geological Survey figures behind a Spring 2021 forecast update. “It is remarkable because Covid-19 exerted a terrible toll on the economy. Consumers bunkered down; states enacted rigid lockdowns. Real GDP declined to a rate not matched since 1946 as the economy transitioned from war time to peace time. Nearly 9.5 million fewer jobs now exist compared to pre-Covid-19 levels. Many businesses did not survive the threat. And yet through all of this, cement consumption grew.”
While major storms resulted in a weak 2021 start for construction, he adds, it is likely that cement consumption growth will match or exceed 2020’s performance. Record low mortgage rates prompted strong gains in 2020 single family home building. Those rates are expected to remain in-place through 2021, resulting in further strong demand for cement consumption. Nonresidential construction market declines are likely to continue this year and next, but the drag on overall growth is expected to lessen.
“This recovery is predicated on continued progress in fighting Covid-19. The rapid pace in vaccinations and increased mask usage have resulted in a decline in death rates from over 3,000 daily in January 2021 to less than 825 today,” Sullivan noted upon the spring update’s early-April release. “The Institute of Health Metrics and Evaluation [second quarter] forecast suggests a sustained and significant decline in daily COVID-19 deaths to less than 170. Progress associated with Covid-19 is the critical factor in the near-term outlook.”
The most significant long-term impact on cement consumption may unfold this year: The White House-proposed $2.2 trillion, eight-year infrastructure program, which expands the traditional definition of infrastructure and contains more than $1.2 trillion in low or no cement intensive projects. If the proposal passes as is, it could contribute more than 7 million metric tons annually. In the spring update, PCA Market Intelligence charts that and two other scenarios hinging on Capitol Hill action in which cement consumption through 2025 could climb from about 104 million metric tons this year to 109 million mt (no infrastructure package), 113 million mt (compromise package) or 116 million (full White House proposal).
“After committing to spending $5.2 trillion in COVID-19 relief and adding another $2 trillion in operations, the federal U.S. debt could rise $7 trillion dollars in 2020-2021,” Sullivan observes. “This puts the discussion of the proposal into context. The proposal must pay for itself which means higher taxes. While investing in traditional infrastructure such as roads and bridges has bipartisan appeal, tax increases and some programs dubiously labeled as infrastructure has caused concern. This concern threatens the potential passage on the infrastructure initiative.