PCA forecasts concentrated weakness in 1H09
Although all US market segments and all regions are expected to record significant declines in cement consumption during 2009, stimulus program-related spending and a stabilising economy in 2010 will lead to stronger gains, according to the most recent economic forecast from Portland Cement Association.
PCA expects cement consumption to decline 17 per cent during 2009 to 77Mt. Viewed in context of 10-percent and 15-percent declines in 2007 and 2008, respectively, this reflects a peak to trough drop in volume of nearly 45Mt – the worst in U.S. history. However, the weakness is expected to be concentrated during the first half of 2009, and by 2010 with a stabilising economy and job creation, consumption will grow seven per cent to a level of 83Mt.
“Weakness in near-term cement consumption will largely stem from declines in the private sector in residential and non-residential construction,” said Ed Sullivan, PCA chief economist. “By the second half of 2010, stimulus spending should enter a phase that includes more traditional infrastructure projects that carry higher cement intensities.”
In addition, Sullivan expects housing starts to stabilise in the second half of 2010, although non-residential construction, which will drop more than 27 per cent in 2009, will continue to decline in 2010.
According to PCA, the potential for a large volume increase in cement consumption for 2011 could be amplified by enactment of a new surface transportation law. The current law expires September 30. With the Obama Administration’s commitment to infrastructure improvement as well as the likelihood that unemployment will be at extremely high levels at the time of the legislation’s negation, a large increase in infrastructure spending is expected to be incorporated. This will contribute to cement consumption reaching 97Mt by the end of 2011 should the legislation be enacted in a timely manner.
“Unemployment is expected to peak during the first quarter of 2010 to levels in excess of 10 percent. 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,” Sullivan said.
Published under Cement News
