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TimePosted 26/11/2018 13:07:01

Is US cement market about to slow?

The US cement market received a note of caution this week with the PCA's latest forecast, which predicted a falling growth rate for cement consumption over the next two years. The Federal Reserve’s actions to gradually increase interest rates will slow construction sector activity, increase mortgage rates for residential buildings and impose higher borrowing costs for non-residential buildings, according to the PCA assessment.



Cement producers in the US may see this as disappointing news following a 5.8 per cent rise in Portland and blended cement sales in August in the USA and Puerto Rico. Texas, California and Missouri were the top performers in terms of US cement consumption during the month and imports have also been strong at 1.394Mt in August 2018 compared to 1.204Mt in August 2017.

Sustaining strong cement sales
To date most cement producers in the US have seen positive business results. Cementir benefitted from the full consolidation of Lehigh White Cement as turnover jumped from EUR10.3m to EUR81m for its North American division, which saw sales volume rise by more than six per cent in 9M18. GCC similarly recorded cement sales in the USA up by 12.2 per cent to US$216.4m in 3Q18, representing 78 per cent of GCC's consolidated net sales. GCC also mentioned that cement volumes in the US were up 11.7 per cent, helped by the acquisition of the Trident facility in Three Forks, Montana. Strong 3Q18 results were also made by Cementos Argos that had cement volumes rising by 3.2 per cent to 1.562Mt in USA. The Florida market was particularly favourable with cement sales seeing double-digit increases in 3Q18 and over 9M18 Argos recorded cement sales volumes of 4.406Mt, slightly up by 0.2 per cent. LafargeHolcim did slightly better in 3Q18 in North America with cement sales of 6.1Mt, up by four per cent on 5.9Mt reported in 3Q17.

Meanwhile, Martin Marietta reported that its US cement business had contributed US$300.6m to group turnover, up 6.9 per cent in 3Q18. A total of 2.48Mt of cement was sold by the company in 3Q18 and the price was ahead by 3.5 per cent to US$120.06/t.

However, some early signs of a change could perhaps be seen in HeidelbergCement's 9M18 results where its cement sales volumes in US and Canada fell by 1.7 per cent YoY to 12.1Mt. Inclement weather accounted for some of the lower sales in spring and September. Buzzi Unicem also reported on September's unprecedented rainfall affecting cement sales, which amounted to EUR791m in 9M18, down EUR61.2m compared to EUR852.2m in 9M17. Titan also reported turnover in the US falling by 4.2 per cent to EUR639.3m after hurricane damage, although cement consumption was forecast to improve in Florida by 7.2 per cent.

Outlook
Looking forward to 2019, while some main macro indicators, such as residential construction, are showing signs of weakness, others remain strong, with infrastructure – driven by highway expenditure – underpinning a solid demand outlook. In its recent forecast, the PCA expects annual growth to remain positive in the USA, maintaining growth at 2.6 per cent in 2019. However, by 2020, annual demand is forecast to slow significantly to 1.6 per cent, as the economic cycle matures, prompting the construction sector to transition towards a more moderate activity phase.

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