Recent data shows that the Texas market registered a 14 per cent decline in April, which analysts at Jefferies believes were mainly due to three factors. First, one of the major producers had some planned shutdowns in April 2011 and compensated by shipping cement into Texas from a surrounding state. This cement was not included in the official Texas shipments data, whereas in April 2010 it had supplied its customers with cement manufactured in Texas, which had been included in the official data. Jefferies estimate that this accounted for around five percentage points of the 14% decline in April’s shipments. Second, there was one less working day in April 2011 than in April 2010, which Jefferies estimate would have accounted for a further five percentage points of the decline. Third, April 2010 had been a strong comparative, with cement shipments in Texas in April 2010 17% higher than in April 2009. The full year increase in 2010 was only 4%. Jefferies understand that the US$5/t price increase implemented in Texas on 1 April 2011 is generally holding, despite poor weather lowering demand in the Northern part of the state during May.
The US Geological Survey data on cement consumption in April is due to be published in mid-June. Jefferies fear that it could be weak, like the Texas data, which as far as it is aware the only state to individually report this data. The national data will also suffer from one less working day in April 2011 than in April 2010. National cement consumption increased by 8.7% in April 2010, as cement demand rebounded after the poor weather at the start of 2010, and the housing tax credit expired on 30 April 2010, bringing forward demand. US cement consumption in the whole of 2010 was only 0.9% higher than in 2009. Also, according to the National Climatic Data Center website, April 2011 was the 108th wettest in the US since records began 117 years ago. There have only been nine Aprils that were wetter in this period. Rainfall was especially high during April 2011 in the Northern US, particularly in the mid-west.
More encouragingly, since the previous Federal highway bill expired on 30 September 2009, it has been extended at the previous level of spending through a series of short-term extensions, the latest of which is due to expire on 30 September 2011. Concerns had increased that the Republican Party would demand a reduction in the level of spending in order to approve a new bill. Last week (Wednesday 25 May), a bipartisan group of four important members of the US Senate’s Environment and Public Works Committee announced that they had reached agreement on the framework for a new six-year $339bn highway bill. It would extend funding at its current level in real terms, but increasing it to cover expected future inflation. In Jefferies view, it’s encouraging that Republican Senators are prepared to support continuing spending at its current level. However, the Senators have still to determine how they would close the substantial funding gap between the planned level of spending and the expected level of funding available if the gasoline tax remains at its current level of $0.184 per gallon. Congress is due to announce its version of a new highway bill in the next few weeks.