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Connect With Concrete Cement Outlook: 2010-2014 Ed Sullivan, Chief Economist PCA World of Concrete February 2010 Named Most Accurate Forecaster By Chicago.

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Presentation on theme: "Connect With Concrete Cement Outlook: 2010-2014 Ed Sullivan, Chief Economist PCA World of Concrete February 2010 Named Most Accurate Forecaster By Chicago."— Presentation transcript:

1 Connect With Concrete Cement Outlook: Ed Sullivan, Chief Economist PCA World of Concrete February 2010 Named Most Accurate Forecaster By Chicago Federal Reserve, 2009

2 Connect With Concrete Portland Cement Consumption Thousand Metric Tons - 54 MMT Growth Rates 2007: : : : : : : : + 8.6

3 Connect With Concrete Net Capacity Expansion: Delayed Thousand Metric Tons The Recession has resulted in commissioning delays and potentially cancelation of expansions

4 Connect With Concrete Portland Cement : Imports Thousand Metric Tons Import Tons 2007: 22, : 11, : 7, : 5, :5, : 5, : 7, : 12,700 Structural Imports Off-Shore Imports First to Cut, Last to Recover

5 Connect With Concrete Portland Cement : Inventory Conditions Days Supply Estimate Days Supply 2007: : : : : : : : 17 Delayed Builds, First to Improve

6 Connect With Concrete Portland Cement : Utilization Rates Percent Utilization Based on Clinker Capacity Utilization Rates 2007: 91.6% 2008: 84.4% 2009: 60.3% 2010: 64.4% 2011: 72.5% 2012: 78.4% 2013: 86.9% 2014: 89.8% Slow Demand Improvement, Digestion of New Capacity & Inventory Reductions Will Delay Utilization Recovery

7 Connect With Concrete Economic Outlook The recession is over…BUT…not for you

8 Connect With Concrete Sub-Prime Financial Crisis Energy Labor Markets State Deficits Economic Adversity Abates Mid-2010

9 Connect With Concrete “Stimulus Timeline Tax Cuts, Entitlement Spending, State Aid Phase I Stabilize Economy, halt adverse momentum Phase II Phase III Shovel Ready Projects Long Term Investments Policy Tool Objective Job Saving Job Creating Job Creation Job Creation, Address Structural Economic Issues

10 Connect With Concrete Job Recovery: Past Recessions - Change, Thousands of Jobs Recession Recession Recession Current Recession

11 Connect With Concrete Ingredients for a “Recovery”

12 Connect With Concrete Ingredients for a “Recovery” Residential Public Late 2010 Recovery in Starts. ARRA continues to accelerate. Cement projects materialize 2 nd half 2010 Cement Consumption: + 5.2% 2010 This Implies continued weak consumption levels during first half of 2010 PCA’s 5.2% growth in 2010 translates into 4 MMT. This “recovery” must be considered in the context of a 54 MMT peak-trough decline.

13 Connect With Concrete Portland Cement Consumption Annual Change, Thousand Metric Tons ResidentialNonresidential Public

14 Connect With Concrete Ingredients for a Housing Recovery

15 Connect With Concrete Residential Cement Consumption Thousand Metric Tons MMT 55% of Total Cement Consumption decline is attributed to residential Residential sector’s adverse impact on cement consumption has run its course.

16 Connect With Concrete Ingredients for a Starts Recovery Inventory no higher than 5 months supply Price stability Carry costs erode expected ROI. Weaker the price increases…lower the months supply trigger point. Homebuilders Expected ROI

17 Connect With Concrete Foreclosures Accelerate Foreclosure Impacts Add to Inventory Depress Prices 2.8 Foreclosures in K Bank possessions. Equates to one out of every 5 homes on the market. Depressed Homebuilder ROI Adds supply. Bank owned properties discounted. Pressures new home prices. Longer carry costs. Lower revenues. Erodes expected ROI. Delays recovery in starts.

18 Connect With Concrete Reasons to Bridle Current Optimism  Slow labor market recovery.  Potential payback from federal homebuyers tax credit.  Increased foreclosures.  Heightened price pressures from bank possessed properties.  Continued tight lending standards.  Potential for interest rate increases.

19 Connect With Concrete Portland Cement Consumption: Residential Annual Change, Thousand Metric Tons PCA’s conservative outlook could suggest an additional 2 million tons for 2010

20 Connect With Concrete Ingredients for a Public Recovery

21 Connect With Concrete Portland Cement Consumption: Public Annual Change, Thousand Metric Tons Recovery Begins 2010

22 Connect With Concrete Aaa A Ingredients for a Public Cement Recovery Highway/Street Cement Consumption ARRA Stimulus State Fiscal Sterilization Outlays accelerating. Design & concrete intensive projects roll out last. Decline in discretionary state cement consumption have been massive during past three years. 2009: 0 MMT 2009: -5.4 MMT Aaa A 2010: 7.5 MMT 2010:-0.7 MMT

23 Connect With Concrete ARRA-Led Recovery

24 Connect With Concrete ARRA – Weekly Highway Construction Spending - Dollars (Trend – No Seasonal Consideration) Money Released Before 2009 Peak Construction Season Ends Higher Outlays Realized in 2010

25 Connect With Concrete Pavement Improvement & Rehab New Bridge, Improvement & Reconstruction New Route & Widening ARRA Cement Intensities Increase Low / No Cement Intensity Moderate to High Cement Intensity High Cement Intensity 0.6 MMT 7.6 MMT 7.4 MMT 0.4 MMT Total ARRA Cement Consumption

26 Connect With Concrete State Sterilization Sterilization by State Fiscal Conditions

27 Connect With Concrete Deficit % Share of Budget FY2009 State Deficits Source: PCA, Center on Budget and Policy Priorities, June 2009 ME RI MA VT NH AL GA SC TN FL MS LA TX OK NM KS MN IA MO AR WY CO ND SD NE WA ID MT OR NV UT AZ CA WI IL IN MI OH KY WV VA NC MD DE PA NY CT NJ HI No Deficit 0-10% 11%-20% 21% +

28 Connect With Concrete Deficit % Share of Budget FY2010 State Deficits ME RI MA VT NH AL GA SC TN FL MS LA TX OK NM KS MN IA MO AR WY CO ND SD NE WA ID MT OR NV UT AZ CA WI IL IN MI OH KY WV VA NC MD DE PA NY CT NJ HI No Deficit 0-10% 11%-20% 21% + Source: PCA, Center on Budget and Policy Priorities, June 2009

29 Connect With Concrete Discretionary State & Local Highway/Street Spending - Millions of Real $ (estimated) Job Losses Generate Deficits –Pushing Discretionary Spending Down State Discretionary Highway Spending Will Act as a Powerful Drag on Total Highway Construction Activity in

30 Connect With Concrete Portland Cement Consumption: State Discretionary Annual Change, Thousand Metric Tons 11 MMT Decline during PCA’s outlook suggests only modest further erosion for 2010

31 Connect With Concrete New Highway Bill

32 Connect With Concrete SAFETEA-LU versus New Highway Bill Assumptions New Highway Bill

33 Connect With Concrete Public Summary

34 Connect With Concrete Portland Cement Consumption: Highway Thousand Metric Tons State Discretionary Highway Bill Stimulus

35 Connect With Concrete After the Crisis

36 Connect With Concrete Portland Cement Consumption Thousand Metric Tons - 54 MMT

37 Connect With Concrete Cement Consumption: Long Term Million Metric Tons Growth in Context of Population Changes, Slower US Economic Growth, Strong Global Growth, Climate Change Legislation and the “Green” Revolution.

38 Connect With Concrete U.S. Supply Balance: No New Capacity Expansion Plans Million Metric Tons Cement Consumption Imports:59 MMT Cement Production

39 Spring Board Meeting Real-Time Construction Data & Analysis Easy-to-use Dashboard by PCA’s award winning economics team. Forecasts & analysis Presentations and Webcasts Historical Data Familiar Excel format Downloaded in real-time! Subscribe at


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