Mixed signals for US cement

Mixed signals for US cement
Published: 17 July 2009


Latest updates for the US cement sector point to continuing uncertainties over the timing and speed of the expected recovery, with no clear picture yet emerging. Stocks have rallied in recent weeks but with many influential US economists still predicting low growth over the next couple of years, it’s difficult to see any firm basis for this current upsurge. On the plus side, US housing indices suggest that there is now a slow recovery in new home sales but the data is patchy, and with higher mortgages now filtering through, the fear is that new sales could now even begin to falter.



However, a gradual US recovery is still expected to kick-in during the third quarter which should be good news to US cement makers. Whether that trend is sustainable will depend in part on labour markets, which continue to deteriorate – latest figures indicating that unemployment will hit the 10 per cent level by the end of this year.

In reality, US cement consumption is likely to continue to slide throughout the rest of 2009, with present indicators suggesting at least a 20% drop on 2008 totals, a trend that has had building sector analysts marking down price targets for companies with a high US exposure – CRH for example down from EUR23 to EUR20 according to recent JP Morgan research.

Likewise, Holcim and Lafarge both remain subdued on their US trading outlook, whereas US-based companies such as Eagle Materials, Martin Marietta and Vulcan Materials are still seeing their stocks underperform as the US stimulus programme – a US$787bn package launched in February this year – has still to translate into a real upswing in construction and cement demand nationwide. The wait might be longer than originally anticipated.