Cement, Energy and Environment

Residential construction has shown signs of improvement, but its recovery will be slow. While growth in existing home sales will fluctuate due to the expiration of the first and second homebuyers' tax credit, single– family housing starts and new home sales are expected to improve. Starts and sales are propelled by the need to replenish inventory, a gradual pickup in household formation, and job growth. Overall, single– family home construction spending will increase over the next ten years; however, even by 2019, we do not see the market reaching its 2005 peak level of US$432 million. While there is light at the "The risk for the cement industry is weighted towards the pessimistic alternative. In this scenario, the downturn in nonresidential construction becomes deeper and longer than expected and demand for cement declines even further." end of the tunnel for the single– family market, the multi-family market will remain in the dark for many quarters to come. Multi– family housing faces two main obstacles to growth: low prices in the single-family market, which are pulling renters away from multi-family living and towards purchases of single– family homes, and tight credit in the commercial market, which has made it difficult for contractors to borrow money for new construction. Fortunately, the upturn in the single-family home market will dominate and total residential construction will increase 6.1 per cent in 2010. Nonresidential construction will remain in its current downturn through 2010. Real spending across most nonresidential construction categories is declining because of difficult financing, continuing job losses, previous overbuilding, and plummeting commercial real estate values. One of the largest players in the nonresidential sector, commercial construction , is expected to post sharp year– over-year declines through 2010, overwhelming gains in the residential sector and dragging annual total construction grovvth down to 6.1 per cent in 2010 before growing 10.5 per cent in 2011. Cement consumption has been declining steadily since June 2006, when the housing market entered a large-scale correction. According to the Portland Cement Association, US Portland cement consumption fell 33.4 per cent from a year earlier in October 2009, while masonry consumption dropped 31.5 per cent. US demand for cement will remain anaemic over 2010 due to the b.leak nonresidential construction outlook. Cement demand will recover when the non- residential construction market improves in 2011. The risk for the cement industry is weighted towards the pessimistic alternative. In this scenario, the downturn in nonresidential construction becomes deeper and longer than expected and demand for cement declines even further. Looking at the regional view of total cement consumption - which includes Portland, blended, and masonry cement - the South Atlantic, Mountain, and Pacific regions all faced annual declines greater than 30 per cent in October of 2009, while all other regions faced smaller double-digit declines. The West North Central fared tiJe best with a comparatively weak decrease of 14.9 per cent. Every region has been pulling back on cement consumption as total construction spending weakens across the board. In 2009, construction spending shrank 15.4 per cent in South Atlantic, 17.0 per cent in the Mountain region, and 16.5 per cent in the Pacific region. The West North Central region declined 0.5 per cent, the smallest decline of all nine Census regions. Over the five year outlook, 200!J-2014, construction growth will be the strongest in the Pacific and Mountain regions. The West North Central region will fare the worst, declining 0.4 per cent over the period. Courtesy: World Cement, March 2010, P9. SHORTANDLONG~ERM FORECASTS FOR THEUS CEMENT INDUSTRY Overview PCA expects 2009 will represent this recession's trough for United States' total cement consumption - reflecting a 26.6 per cent decline (Portland cement -26.3%) from weak 2008 levels. The cyclical downturn in total cement consumption, measured peak-to-trough, represents a 54 million t decline from 2005 peak levels - the worst volume decline in history. This downturn has coincided with a period of aggressive expansion and modernization. Large market imbalances have materialized, resulting in a contraction of import supply. Courtesy: World Cement, March 2010, P23. 58