PCA Expects Stimulus to Impact Cement in 2010

PCA Expects Stimulus Package to Impact Cement Consumption in 2010

Although all market segments and all regions are expected to record significant declines in cement consumption during 2009, stimulus program-related spending and a stabilizing economy in 2010 will lead to stronger gains, according to the most recent economic forecast from Portland Cement Association (PCA).

PCA expects cement consumption to decline 17 percent this year to 77 million metric tons. 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 45 million metric tons — the worst in U.S. history, the association says. However, the weakness is expected to be concentrated during the first half of this year, and by 2010 with a stabilizing economy and job creation, consumption will grow 7 percent to a level of 83 million metric tons.

“Weakness in near-term cement consumption will largely stem from declines in the private sector in residential and non-residential construction,” PCA Chief Economist, Edward Sullivan, said. “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 stabilize in the second half of 2010, although nonresidential construction, which will drop more than 27 percent 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 Sept., 30, 2009. 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 97 million metric tons 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.