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Stimulus To Lift Cement in 2010

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Cement consumption will rise by 5.2% this year, aided by federal stimulus spending, according to Portland Cement Association’s chief economist, Ed Sullivan. He gave a 2010-14 forecast on Feb. 2 at the World of Concrete show in Las Vegas.

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Last year’s administrative delays releasing American Recovery and Reinvestment Act funds will result in a $22-billion federal spending surge this year, including more money for street and highway construction, which account for 30% of all cement consumption, Sullivan said. But the first half of 2010 will be “slow and tepid,” he noted.

Despite an expected 4-million-tonne bump in consumption this year, a full market recovery could take years, Sullivan warns. The recession has seen consumption drop by 54 million tonnes since 2006. “Clearly, the industry is hurting,” said Sullivan. “It will be a 10-year recovery, peak to trough.”

Financing woes, a housing downturn and unemployment have curtailed demand, resulting in capacity-expansion delays and cancellations as well as plant shutdowns. This could potentially impact future cement availability and pricing, observers say. Cement imports are anticipated to more than double in volume over the next four years to 12.7 million tonnes, Sullivan said.

“Congress and the Obama Administration knew that the $800 billion [stimulus bill] wasn’t enough,” said Sullivan. “It was a bridge...but we cut too many jobs—we’ve cut into the bone. At the end of 2012, we still won’t be at 2007 levels.”

A turnaround isn’t likely until construction spending improves and credit markets thaw. Lending requirements won’t loosen until employment shows six to nine months of sustained growth. “I still have tremendous optimism for a market recovery,” Sullivan added. “But I’m much more cautious of when it will happen.”

 

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