The US Portland Cement Association (PCA) has just reduced its forecasts for US cement consumption to relatively unchanged levels for 2011E and 2012E on the back of consistent slowdown in economic growth and weakness in each of the key construction sectors.
The PCA now expects cement consumption in the US to show only minor gains in 2012 up just 0.4% compared to an earlier +4% uplift – a situation based on continuing uncertainties over the US highways bill and generally poor economic prospects nationwide. The PCA suggests the new highways bill to be in place for fiscal 2014 at existing levels compared to its previous assumption of a 20% improvement.
On a brighter note, new housing starts to improve, starting in 2012, following a slight decline of some 2% this year. The PCA expects residential construction spending to improve by 5% in 2012 and jump by 45% in 2013. Housing starts are expected to advance from 564,000 this year to 626,000 next year before rising to 1.14m in 2013, mainly driven by improving single-family starts.
Non-residential spending is expected to remain subdued with the PCA expecting non-residential construction activity to remain at depressed levels this year before recovering slightly next year. PCA expects weakness in commercial spending to continue into 2012E followed by a gradual recovery in 2013E. However, industrial construction spending is expected to see better demand in 2012 due to a likely increase in pent-up corporate capex on the back of better earnings from manufacturing sector.
Commenting on this news, analysts at JPMorgan Cazenove suggests that the PCA forecasts still look somewhat optimistic in 2012 while it also remains skeptical about a sharp improvement in new housing starts in 2013, suggesting more of expect the gradual recovery to continue. Its analysts also agree with the PCA regarding improvements in industrial construction spending.