Summer Cement Outlook

Transcription

1 Contact: Ed Sullivan, Group VP & Chief Economist, (847) , Summer Cement Outlook Overview Despite volatility in equity markets and concerns about global growth conditions, the economic fundamentals in the United States are sound and should support sustained growth in construction activity. The U.S. economy is characterized by steady and strong gains in net job creation, low inflation, low interest rates, improving business and consumer confidence, healthy corporate profits and a strong banking systems characterized by a gradual reduction in risk premiums and slightly easier credit terms. All of this paints an optimistic near-term outlook. While some sectors have been hurt by a strong dollar and low oil prices, these factors hold the potential for a growth dividend later in the forecast horizon. These solid fundamentals that drive the United States economy, as well as construction and cement markets are sometimes forgotten in the context of slower economic growth in China and developing economies, their impact on earnings among some multinationals, and disturbances in the equity markets. While these disturbances can have an adverse impact on United States construction markets, PCA believes at this point that the impacts will be modest and contained. PCA s Market Intelligence group expects construction activity will grow 4.8% this year and even stronger growth is expected for next year. Cement consumption is expected to grow 5% this year and 6.5% in Each of the three key sectors on cement consumption, residential, nonresidential and public construction is experiencing growth. Typically, when all three sectors are positive, strong volume gains materialize. Portland Cement Consumption Thousand Metric Tons 140, , , = 8.7% 2015 = 5.0% 2016 = 6.5% 80,000 60,000 40,000 20,

2 Despite the favorable economic environment, PCA has adjusted its 2015 forecast down from an expectation of 7.5% growth in the Spring forecast to nearly 5.0% growth currently. The downward adjustments reflect a greater adverse impact on construction activity emanating from the decay in oil prices, a slightly softer outlook for residential construction, and softer than expected cement intensities. Economic Outlook Despite volatility in equity markets and concerns about global growth conditions, the economic fundamentals in the United States are sound and should support sustained growth in construction activity. The U.S. economy is characterized by steady and strong gains in net job creation, low inflation, low interest rates, improving business and consumer confidence, healthy corporate profits and a strong banking systems characterized by a gradual reduction in risk premiums and slightly easier credit terms. All of this paints an optimistic near-term outlook. While some sectors have been hurt by a strong dollar and low oil prices, these factors hold the potential for a growth dividend later in the forecast horizon. These solid fundamentals that drive the United States economy, as well as construction and cement markets are sometimes forgotten in the context of slower economic growth in China and developing economies. International economic weakness will impact earnings among some multinationals and cause disturbances in the equity markets. While these disturbances can have an adverse impact on United States construction markets, PCA believes at this point that the impacts will be modest and contained. The recession was largely generated by imbalances created in the credit market. During the past several years, the economy has re-balanced. Given the severity of the pre-existing imbalances the healing process took a good bit of time. The healing process improved consumer debt-to-income levels to an 18 year best. Credit quality is arguably the strongest has ever been and the banking system is sound. Corporate profits are robust. The labor market has strengthened and added more than 3 million net new jobs in 2014 with a nearly equal amount expected for 2015 and These gains have occurred in the context of declining unemployment rates adding to the prospect that wage gains will supplement consumer spending growth. Inflation and interest rates are low. Consumer wealth is expanding as home price increases supplement gains in the stock market. Going forward, PCA believes the underlying economic fundamentals will continue to strengthen. The United States job market lies at the core of PCA s optimistic outlook regarding the economy, construction markets and expected cement volumes in the years ahead. Thus far, the monthly job creation rate is averaging 211,000 net new workers during This pace is expected to edge up in the months ahead. The sustained strengthening in job creation comes in the context of sub-6% unemployment rates. This implies three phenomena are likely to accompany this job creation scenario. First, the job expansion becomes broader based and moves well beyond certain part-time and lower paid service jobs that typically characterize the early stages of recovery. Second, as labor markets tighten, pressure on wage gains will materialize in a much stronger way than they have thus far. Third, stronger wage gains will encourage a re-investment by workers themselves to acquire new skills and induce a higher labor participation rate. This will moderate improvement in unemployment rates. Sustained strength in job creation, coupled with a gradual shift in the mix of jobs toward higher skills and more significant wage pressures suggest added strength to consumer spending. The favorable labor market conditions come in the wake of a long period of consumer deleveraging or, paring down debt. Debt to household income now lies at an 18 year low. Consumer balance sheets have endured a healing period and with improvement in the labor markets will be more able to spend than they have been in quite some time. 2

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4 A key factor that has played a role in restraining the pace of recovery until recently has been low consumer, business and banking confidence levels. Consumer confidence has increased significantly during the past year. PCA believes that the conditions and opportunities that confront consumer and business entities day-to-day shape confidence levels. Stronger labor markets, relatively low inflation and interest rates, increasing access to credit, and finally rising perceptions of wealth based on rising home prices and strong performance in equity markets each point to the fundamentals for gains in consumer confidence. The conditions that have led to gains in 2014 are expected to remain in play for as well. The picture painted for consumers is one of a willing and able consumer. Not only will consumers be in an improved position to increase spending, the existence of massive pent-up demand suggests that they will need to spend. The past recession was so severe consumers postponed needed durable goods purchases to make ends meet generating pent-up demand. The recovery that followed was so muted that pent-up demand balances continue to get larger. During , for example, more than 24 million light vehicle purchases were postponed. This level of pent-up demand is roughly four fold the amount of light vehicle pent-up demand generated by the severe double-dip recession of the early 1980 s. The existence of pent-up demand in such large quantities could provide ample fuel for strong consumer spending for some time. PCA expects aggregate economic demand will remain strong in the years ahead. Slack in the economy will gradually dissipate and be replaced by gradual tightening in the workforce, logistics and new reliance on imports. To a certain extent, many of these conditions are occurring now. The natural result of tight market conditions is higher wages and prices lifting the overall inflationary pressures. To the extent that the world economy is in a slower growth trajectory, some relief from inflation is expected. Strong nearterm economic conditions in the United States versus the rest-of-the-world suggest a stronger U.S. dollar and lower import costs/prices. In addition, slower rest-of-the-world growth implies more tepid demand for raw materials, such as oil. Both conditions work to moderate near-term inflationary pressures in the context of swelling demand in the United States. Finally, PCA expects the Federal Reserve Bank (Fed) will correctly time its intervention on interest rates. The Fed has signaled that it will begin raising interest sooner rather than later. Keep in mind, low oil prices and a strong dollar diminish already low inflationary threats. Furthermore, the strong dollar will reduce net exports and this could hinder improvement in the job market. Economic disruption in energy producing states caused by low oil prices could further hinder gains in the job market. PCA, as a result, expects the Federal Reserve will move slowly to raise rates. In addition, the increases are expected to be smaller than previously anticipated. PCA s scenario includes a 25 basis point increase in late 2015, followed by a 25 basis point increase at the start of All totaled, 150 basis point increases are expected for each year 2016 through Such a scenario is expected to gradually detract from real GDP growth and at the same time ward off the potential of strong gains in inflation. Construction Outlook The United States construction outlook is based on the foregoing general economic assessments. The combination of stronger economic growth, broadening expansion in jobs and low interest rates form a strong foundation for growth in residential, nonresidential and even public construction. Each of these construction sectors is expected to record growth the first time in seven years. Such conditions typically result in strong percentage and volume gains in cement consumption. Given the depths of the decline in some construction segments, and the tepid recovery thus far, even modest gains in construction activity volume are expected to result in large percentage gains. Even with the large and sustained percentage gains, much construction activity is expected to remain well below past cyclical peaks and pre-boom averages for the next several years. 4

5 Residential Outlook For quite some time PCA has been among the more conservative forecasts for residential construction. Even given this distinction, our starts projections have been on the high side when compared against actuals. In this forecast, PCA has reduced its outlook for residential construction activity. Total starts activity is now expected to reach 1.13 million in 2015 and 1.27 million in 2016 compared to 1.18 million and 1.34 million projected in the spring forecast. While the adjustments are small, they represent a 1.2 million metric ton reduction in 2015 and 1.8 million metric ton reduction in 2016 projections compared to the spring outlook. The starts outlook has also been reduced in the out years of the forecast. Data issues surround residential improvements. PCA s new apparent use model reduces the amount of cement consumption attributed to residential improvements by roughly one million metric tons annually. In addition, put-in-place data issued by the government has been volatile and unexpectedly sour. The Bureau of Census recognizes there is an issue with the series and is working to provide better estimates of the historical series. PCA s projection reflects our model s projection and allows for the disconnect with the data reported by the government. As such, our treatment of the residential improvement sector may result in downside risk. The improving fundamentals facing single family construction are expected to continue throughout the forecast horizon. Strong employment and job creation generates household formation and the need for more housing units. Job gains in the context of low unemployment rates are expected to result in stronger wage gains. Mortgage rates are low and interest rates are expected to increase at a gradual pace. Credit standards are easing somewhat ant FICO scores are improving. These conditions are expected to prevail during most of the forecast horizon and support sustained gains in single family sales and construction. Single family construction should be performing better than what has materialized if focus is placed on cyclical trends expected during the recovery stage from a severe recession such as job creation, low mortgage rates, favorable affordability, and rising rents and a recovery in home prices. In addition, pentup demand has been accumulating since the recession began and should have begun revealing itself on the market six years into the recovery. Should be Powerful words. The improvement in cyclical demand conditions, have been the basis of PCA starts projections. These projections that have proven to overestimate expected single family starts activity. Other than cyclical demand factors may be at work possibly reflecting either structural changes or supply constraints that may now be present in the market. Household formation, for example, has not increased in proportion to job creation. On average, one household is created for every two jobs created. In 2014, more than 2.6 million net new jobs were created. Only 700,000 new household were created. Based on historical trends and the job creation that materialized, 1.3 million new households should have been created. That implies an extra 600,000 households and corresponding increase in housing demand that did not materialize. According to the 2013 Current Population Survey data, the share of year-olds also known as millennials living with their parents increased from around 27% before the housing crisis to 31%, where it remains in Of those living with their parents, 44% of year-olds were unemployed, while 25% held a job. This may be explained by the existence of overwhelming student debt levels, poor career job opportunities and harsh lending standards. Presumably, this adverse phenomenon will work itself out as the job market continues to gain strength. To the extent this phenomenon remains a characteristic in the market, the improvement in housing starts will underperform expectations based purely on the cyclical fundamentals. 5

6 Single family sales activity may also be influenced by millennials perceptions regarding home ownership. Millennials formative years occurred during the recession a time when foreclosures, home price declines, and bankruptcies were commonplace. The logic behind homeownership as a source of wealth that has characterized generations, may not be in-place for the millennials. If so, single family sales may be significantly impaired. PCA believes the millennials household formation and homeownership pattern play a key role in slower than expected starts activity recovery. Millennials are slower to move out of their parents homes, marry later, and have children later than past generations. It is likely as more millennials form families, their appetite for single family homes will increase as well. Supply constraints may also be playing a role in hindering a faster recovery in housing starts. Nationwide, the Associated General Contractors of America surveyed 1,400 construction contractors. The national survey said 86 percent of firms report trouble filling available positions, up from 83 percent in 2014 and 81 percent in The association said an aging workforce is one reason for the shortage, and the fact that many laid-off construction workers left the industry during the Great Recession. In several states, the skills shortage targets concrete. In the Florida survey, all firms surveyed said they are having trouble finding experienced carpenters, while 90 percent of firms said they had trouble finding concrete workers. Finally, PCA s latest forecast also places more emphasis on multifamily starts. When household formation occurs as a result of a stronger labor market, it is then split between household living in a single family home or living in a multifamily. Credit conditions facing first-time home buyers, damaged credit and weighty student loan obligations, all work to strengthen multifamily projections. As a result, PCA has increased the composition of housing starts in favor of multifamily. Strong multifamily construction is expected to persist throughout the forecast horizon. The growth of residential construction continues to vary considerably by region. In terms of measuring the overall health of a regional housing market, PCA segmented state-by-state activity into three groupings including: 1) states likely to lead the recovery, 2) states likely to lag the recovery and, 3) states likely to keep pace with the national average. The groupings were based on data relating to each state s 6

7 ranking in terms of mortgage delinquency, unemployment rate, and home prices relative to peak price (serves as a regional inventory proxy). Each of these data sets were weighted with regard to importance and a composite ranking was determined. Based on this methodology, the housing recovery has first unfolded in the interior U.S. Through lower overbuilding and strong agriculture and energy based economies, this region has led the recovery and some states in the tier are now considered recovered/expanding. As the recovery continues to unfold, regions that once lagged recovery now begin to emerge as growth leaders. The focus should shift to growth potential of these states. Regions such as the Southwest and Southeast still have the weakest housing fundamentals on a relative basis to the interior U.S. But on a construction activity basis, given the extremely depressed bases from which these regions are recovering from, they will likely be the housing growth leaders in coming years. In 2015, the Pacific division is expected to see the largest percentage gains in single family construction activity. Favorable demographics and depressed levels amplify the expected rate of growth. The East North and South central regions which comprise the corridor from the Great Lakes down to the Gulf are also expected to see above trend growth following a much lagged recovery. The Great Lakes region in particular has a high concentration of judicial foreclosure states which slowed market mechanisms in clearing distressed properties. As these properties now finish moving through the system, coupled with improving regional labor markets, the region is positioned to join the housing recovery underway throughout many parts of the nation. All other regions are expected to see housing rates of growth in line with national averages as growth prospects are expected to be broad based. Aside from near-term cyclical assessments, it is important to address longer term factors influencing the demand for housing. Pent-up demand, for example, refers to under-building in housing construction relative to the growth in population and household formation. This condition has been ongoing since Pent-up housing starts are estimated to be near 5.6 million single family starts at the end of Since PCA projections for starts during the remainder of the forecast horizon lies below demographic drivers of longer term starts, pent-up demand is expected to grow to nearly 6.6 million starts by While substantial pent-up demand has been generated during the last several years, at issue is the timing and magnitude of its release onto the market. If a ten year release horizon is assumed, the pent-up demand would add 600,000 starts annually above the levels determined by demographics. This represents roughly a 33% increase over normal starts associated with household formation. Such high volumes of vented pent-up demand will probably not materialize soon. Rather, the release of pent-up demand will probably gradually leak into the market over time and add support to underlying near-term fundamentals. PCA believes vibrant demand that is punctuated with a strong release of pent-up demand will not materialize until after Nonresidential Outlook Nonresidential construction gains are expected to be driven by growth in the expected return on investment (ROI) for commercial properties. ROI, according to the PCA model, has two essential components including net operating income (NOI) and asset appreciation potential. Between the two, PCA believes NOI is the more important metric to focus on this early in the recovery. It s strengthening will play an increasingly important role in determining asset appreciation in the years ahead influencing total ROI. To this end, nonresidential NOI is tied to job creation. Job creation, either directly or indirectly, translates into higher occupancy and leasing rates. Such growth translates into stronger net operating income for nonresidential properties. As NOI increases, property values strengthen. With the strengthening in property values, lending risk declines and access to credit becomes more available. The combination of improved NOI, increases in property values, and more available credit sets the stage for a commercial construction expansion. The rate of improvement will vary widely among regions in the United States. 7

8 With the strengthening in the labor markets and the overall economy, the expected NOI for nonresidential properties is expected to increase. From an estimated 8.0% growth achieved in 2014, nonresidential construction is expected to increase to 10.7% in 2015, followed by 5.3% in Oil Impact on Cement Consumption Global economic growth, with focus on China, has slowed. Demand growth for commodities, including oil, has softened. Oil supply has increased in the United States and other regions as well. These conditions have forced a dramatic decline in oil prices. Forecasting energy prices is a complex endeavor, and an effort beyond PCA s capabilities. In lieu of in-house oil projections, PCA relies on Energy Information Agency (EIA) projections contained in their short-term and long-term annual forecasts. Since the Spring forecast the has reduced its projections for oil prices considerably reducing West Texas Intermediate price projections by 10% for 2015 and 18% for Out years have also been reduced. An extremely tight correlation exists between oil prices and drilling activity. The downward adjustment in oil prices by the EIA implies an additional downward adjustment in drilling activity. PCA now expects a 41% decline in drilling activity during 2015, compared to a 32% decline expected during the Spring forecast. Further declines are expected in Depressed conditions are expected to continue through Thereafter, gradual increases in drilling activity are expected to support growth in cement consumption. Until then, however, the energy sector is expected to exert a drag on cement consumption growth. The direct impact from reduced drilling activity suggests a 1.2 million metric ton reduction in oil well cement during More modest declines are expected for Unfortunately, there are other adverse construction impacts associated with the reduction in drilling activity. With less drilling, local economies engaged in energy production suffer. Job losses materialize. Infrastructure, housing, and retail construction each face a new layer of adversity to the detriment of cement consumption. PCA estimates for every one ton of oil well cement lost from reduced drilling activity, 2.9 tons of cement consumption is lost from coincidental energy production construction. This adverse impact is greater in economies less diverse (in North Dakota the ratio is 5 to 1), and less severe in economies that enjoy a more diverse economic base (in Texas the ratio is 1.9 to 1). 8

9 The combination of the EIA s lower oil price outlook and larger than previously expected adverse impact of drilling activity declines on coincidental construction activity is a significant contributor to the downward adjustment cement consumption estimates for 2015 and beyond. Public Outlook Increased federal support to construction activity is not factored into the forecast. PCA assumes federal support of the highway program will remain fixed in nominal values. In the context of inflation, this implies a gradually diminishing factor contributing toward public construction. The gradual strengthening in public construction activity, however, does not lie with the federal side of the equation, but instead with the state and local side of the equation. As the economy gains momentum, job gains will add strength to states ability to spend and rising home prices will eventually support stronger construction spending at the local level as well. Both these conditions, however, still have some time to brew before resulting in a significant positive impact on public spending. In addition, PCA expects an increase in local spending on public construction beginning in fiscal While, localities receive state and other funding, roughly 75% of tax revenues are based from property taxes. Unfortunately, property values declined dramatically during thereby reducing local budgets and construction spending. Using local employment as a proxy for local spending activity and home prices as a proxy for property taxes, PCA estimates there is a three year lag between changes in home prices and local spending activity. Home prices, on a national basis, began recording sustained gains in mid This implies an increase in local spending activity could begin in mid-2015 (fiscal 2016). Furthermore, rough analysis suggests that municipalities have gradually increased the mileage rates applied to properties. As home prices rise, therefore, there is the potential that localities receive an additional boost to budgets via the higher property tax rates. Import Outlook Rather significant adjustments have also been made to the outlook for cement imports. The seasonally adjusted annual rate has exceeded 12 million metric tons during each of the past four months, compared to roughly 8 million metric tons in This uptick in imports is surprising given it has materialized at a 9

10 time when industry utilization rates lie below 80%. Imports are typically viewed as a supplement to domestic capacity and their volumes rise as utilization exceed 85%. Port activity suggests that market stress explains at least some of the increase in imports. The port of Houston, for example, shows a 540,000 increase in SAAR volume over 2014 levels during the second quarter. Tight market conditions in southern Texas may explain the increase in volume. PCA believes the enticing cocktail of a strong dollar and low seaborne freight rates is largely responsible for the sooner than expected growth in imports. Ports showing significant increases in import volume, such as Cleveland and Detroit, are not characterized by tight market conditions. The increase in imports comes directly at the expense of higher domestic utilization rates. In a market that is expanding by roughly 4 million metric tons compared to last year and import gains recently near a 4 million metric ton seasonally adjusted annual rate, suggest little if any improvement in the industry s domestic capacity utilization rate. In the context of slower than expected world economic growth, it is likely that the U.S. dollar will remain elevated and seaborne freight rates will remain depressed during most of the forecast horizon. This suggests that imports attractiveness will not wane soon. As a result, PCA has increased projections for imports not only for 2015, but throughout the course of the forecast horizon. In doing so, projected domestic utilization rates are dampened. 10

11 U.S. Forecast Tables August 31, 2015 Source: Portland Cement Association s Market Intelligence Group based on publicly available sources believed to be reliable; however, accuracy cannot be guaranteed. The Portland Cement Association assumes no legal responsibility for the outcome of decisions or commitments made on the basis of this information. Reproduction or redistribution without authorization of the Portland Cement Association is prohibited Portland Cement Association

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13 United States Forecast Summer 2015 Economic Forecast General Economic Factors - Real GDP Growth (%) 2.2% 2.4% 2.4% 3.1% 3.1% 3.0% 2.9% 2.8% - Unemployment Rate (%) 7.4% 6.1% 5.4% 5.2% 5.0% 5.0% 5.2% 5.2% - Employment 137, , , , , , , ,461 - Change in Employment 2,331 3,197 2,604 2,700 2,794 2,691 2,588 2,492 - Inflation Rate (%) 1.5% 1.6% 1.2% 1.8% 2.1% 2.3% 2.3% 2.2% - Consumer Sentiment Index (Year End) Total Housing Starts (000) 929 1,002 1,132 1,269 1,386 1,484 1,581 1,710 - Oil Price, WTI Per Barrel $97.98 $93.17 $50.00 $54.00 $64.00 $70.07 $71.51 $ Note: Oil Rig Count 1, , , , ,184.1 Key Interest Rates - Mortgage Rate - 30 Yr Fixed (%) Federal Funds Rate Three Year Treasury (%) BAA Bond (%) Implied Corporate Risk Premium Key Single Family Factors - Single Family Starts (000) ,061 1,148 1,266 - Average New Home Sq Footage 2,249 2,274 2,304 2,294 2,284 2,274 2,254 2,234 - Total Single Family Sq Footage (Million) 1,397 1,469 1,723 1,989 2,220 2,412 2,587 2,828 - Average Cement Tons Per Start Mortgage Rate - 30 Yr Fixed Median Home Price (000) $262.0 $283.9 $293.9 $303.3 $313.1 $322.4 $331.3 $ Home Appreciation Rate 8.4% 8.4% 3.5% 3.2% 3.2% 3.0% 2.8% 2.7% - Average Monthly Payment $1,251 $1,384 $1,374 $1,543 $1,783 $1,998 $2,212 $2,335 Key Multi-Family Factors - Multi-Family Starts (000) Average New Home Sq Footage 1,386 1,426 1,471 1,461 1,461 1,458 1,453 1,453 - Total Multi-Family Sq Footage (Million) Average Cement Tons Per Start Vacancy Rate (%) Mortgage to Rent Ratio Target Rental Population (20-29) Index Key Nonresidential Factors - Capacity Utilization (%) Office Vacancy Rate (%) Office Worker Employment 29,350 30,149 30,885 31,584 32,294 32,990 33,668 34,329 General Cement Ratios - Cement Consumption (Per 000 Capita) Cement Tons Per Mil Construction Contact: Ed Sullivan, Chief Economist, PCA, (847)

14 Construction Put-in-Place United States (Billions 2009$) Summer Total , , , ,166.3 Residential Buildings New Housing Units Single Family Multi Family Improvements Nonresidential Buildings Industrial Office Hotels, Motels Hospitals, Institutions Religious Educational Other Commercial Public Utility & Other Farm Nonresidential Miscellaneous Public Construction Buildings (1) Highways & Streets Military/Public Security (1) Conservation Sewer Systems Water Supply Systems Percent Change Total 1.9% 2.2% 4.8% 7.3% 5.5% 4.9% 4.7% 4.1% Residential Buildings 12.0% -2.0% 6.3% 13.8% 8.3% 6.7% 6.2% 4.7% New Housing Units 23.4% 8.9% 8.2% 19.3% 10.0% 7.6% 6.7% 4.6% Single Family 21.2% 5.6% 6.3% 21.6% 10.9% 8.3% 7.1% 4.6% Multi Family 36.6% 26.3% 16.5% 9.9% 6.1% 4.4% 4.8% 4.6% Improvements -2.0% -18.8% 2.5% 1.9% 4.0% 4.0% 4.9% 5.2% Nonresidential Buildings 3.8% 8.0% 10.7% 5.3% 5.3% 4.8% 4.2% 4.2% Industrial 3.5% 9.3% 7.1% 4.2% 3.8% 3.6% 2.5% 1.9% Office 7.6% 13.9% 15.8% 8.0% 6.6% 3.5% 3.4% 3.6% Hotels, Motels 22.9% 6.3% 23.8% 3.6% 3.9% 4.2% 3.1% 3.0% Hospitals, Institutions -7.9% -7.5% 12.2% 2.6% 2.8% 4.3% 6.4% 5.9% Religious -12.3% -12.3% -1.5% -3.0% 0.8% 0.3% 0.6% 1.0% Educational -0.9% -3.8% -2.1% -0.6% 1.4% 1.4% 1.4% 2.2% Other Commercial 6.9% 17.6% 10.4% 8.1% 8.5% 8.6% 6.6% 7.0% Public Utility & Other -12.5% 15.8% -7.5% 2.0% 3.5% 4.2% 4.0% 4.0% Farm Nonresidential -4.7% 1.4% -1.2% 0.0% 2.2% 2.4% 2.2% 2.4% Miscellaneous 5.5% 1.4% 3.7% 2.1% 1.6% 1.7% 1.9% 1.7% Public Construction -6.3% -1.9% 3.6% 3.0% 2.9% 3.1% 3.4% 3.7% Buildings -11.3% -6.0% 4.8% 3.5% 3.4% 3.8% 4.1% 4.4% Highways & Streets -1.1% 1.5% 1.7% 1.8% 1.9% 2.2% 2.4% 2.7% Military/Public Security -10.0% -3.6% -5.6% 1.6% 1.4% 1.3% 1.2% 1.5% Conservation -9.1% 25.7% 8.7% 5.4% 3.6% 3.2% 2.8% 3.3% Sewer Systems -2.9% 2.0% 7.9% 4.4% 4.1% 4.0% 4.2% 4.3% Water Supply Systems 3.2% -8.3% 3.1% 3.4% 3.6% 3.8% 4.0% 4.1% Contact: Ed Sullivan, Chief Economist, PCA, (847)

15 Portland Cement Consumption United States (000 Metric Tons) Summer Total 79,538 86,496 90,809 96, , , , ,694 Residential Buildings 22,990 22,591 25,570 28,443 31,147 33,505 36,001 38,811 New Housing Units 15,422 16,438 19,264 22,016 24,462 26,550 28,704 31,137 Single Family 12,634 13,261 15,690 18,259 20,552 22,520 24,550 26,833 Multi Family 2,788 3,177 3,574 3,756 3,910 4,030 4,154 4,304 Improvements 7,568 6,153 6,306 6,427 6,685 6,955 7,298 7,675 Nonresidential Buildings 10,634 12,670 14,621 16,220 18,013 19,917 21,789 23,523 Industrial ,133 1,324 1,527 1,724 1,668 Office 1,080 1,472 1,878 2,215 2,560 2,856 3,166 3,501 Hotels, Motels ,033 1,105 1,170 Hospitals, Institutions 1,317 1,328 1,618 1,791 1,977 2,203 2,494 2,800 Religious Educational 1,975 2,107 2,173 2,270 2,411 2,558 2,703 2,824 Other Commercial 5,005 6,248 7,055 7,797 8,648 9,596 10,448 11,404 Public Utility & Other 3,937 5,574 4,916 4,768 4,680 4,611 4,519 4,413 Farm Nonresidential 3,066 3,106 3,073 3,077 3,149 3,230 3,306 3,391 Oil & Gas Wells 2,870 2,997 1,788 1,620 1,584 1,618 1,659 1,977 Miscellaneous 1,601 1,827 1,983 2,114 2,223 2,360 2,506 2,650 Public Construction 34,440 37,731 38,857 40,452 41,786 43,299 44,831 46,578 Buildings 1,875 1,911 2,052 2,175 2,301 2,443 2,600 2,774 Highways & Streets 23,871 25,662 26,201 26,660 27,146 27,771 28,354 29,063 Military/Public Security Conservation 2,281 3,047 3,121 3,306 3,442 3,569 3,687 3,827 Sewer Systems 3,498 3,951 4,502 4,950 5,412 5,899 6,428 6,998 Water Supply Systems 2,758 3,010 2,837 3,213 3,331 3,460 3,600 3,749 Percent Change Total 40% 4.0% 87% 8.7% 50% 5.0% 65% 6.5% 61% 6.1% 58% 5.8% 56% 5.6% 36% 3.6% Residential Buildings 17.2% -1.7% 13.2% 11.2% 9.5% 7.6% 7.5% 7.8% New Housing Units 24.9% 6.6% 17.2% 14.3% 11.1% 8.5% 8.1% 8.5% Single Family 23.9% 5.0% 18.3% 16.4% 12.6% 9.6% 9.0% 9.3% Multi Family 29.9% 13.9% 12.5% 5.1% 4.1% 3.1% 3.1% 3.6% Improvements 4.0% -18.7% 2.5% 1.9% 4.0% 4.0% 4.9% 5.2% Nonresidential Buildings 10.8% 19.2% 15.4% 10.9% 11.1% 10.6% 9.4% 8.0% Industrial 6.0% 5.0% 25.2% 19.3% 16.9% 15.3% 12.9% -3.2% Office 24.6% 36.3% 27.6% 18.0% 15.6% 11.6% 10.9% 10.6% Hotels, Motels 17.0% 53.5% 28.5% 7.4% 7.6% 7.8% 6.9% 5.9% Hospitals, Institutions -5.3% 0.9% 21.8% 10.7% 10.4% 11.4% 13.2% 12.3% Religious -8.0% -4.0% 7.1% 4.7% 8.3% 7.2% 3.4% 4.5% Educational -12.1% 6.7% 3.1% 4.5% 6.2% 6.1% 5.7% 4.5% Other Commercial 27.4% 24.9% 12.9% 10.5% 10.9% 11.0% 8.9% 9.1% Public Utility & Other 6.9% 41.6% -11.8% -3.0% -1.9% -1.5% -2.0% -2.3% Farm Nonresidential -4.4% 1.3% -1.1% 0.1% 2.3% 2.6% 2.4% 2.6% Oil & Gas Wells 13.9% 4.4% -40.3% -9.4% -2.2% 2.1% 2.6% 19.1% Miscellaneous -4.5% 14.1% 8.5% 6.6% 5.1% 6.2% 6.2% 5.8% Public Construction -4.8% 9.6% 3.0% 4.1% 3.3% 3.6% 3.5% 3.9% Buildings -8.6% 1.9% 7.4% 6.0% 5.8% 6.2% 6.4% 6.7% Highways & Streets -6.2% 7.5% 2.1% 1.8% 1.8% 2.3% 2.1% 2.5% Military/Public Security 16.2% -5.2% -3.8% 3.5% 3.3% 3.1% 3.0% 3.3% Conservation -4.0% 33.6% 2.5% 5.9% 4.1% 3.7% 3.3% 3.8% Sewer Systems 1.2% 13.0% 13.9% 9.9% 9.3% 9.0% 9.0% 8.9% Water Supply Systems 2.4% 9.1% -5.8% 13.3% 3.7% 3.9% 4.1% 4.1% Contact: Ed Sullivan, Chief Economist, PCA, (847)

16 U.S. Cement Consumption Forecast United States (000 Metric Tons) Summer Total Cement Consumption 81,663 88,747 93,161 99, , , , ,810 Portland Cement 79,538 86,496 90,809 96, , , , ,694 Masonry Cement 2,125 2,251 2,352 2,498 2,647 2,795 2,948 3,117 - Portland Share of Total, (%) 97.4% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.4% Cement and Clinker Imports 7,243 8,392 10,322 11,882 14,111 17,232 20,764 25,212 - Import Share, (%) 8.9% 9.5% 11.1% 12.0% 13.4% 15.5% 17.7% 20.7% Percent Change Total Cement Consumption 4.1% 8.7% 5.0% 6.5% 6.1% 5.8% 5.6% 3.6% Portland Cement 4.0% 8.7% 5.0% 6.5% 6.1% 5.8% 5.6% 3.6% Masonry Cement 6.7% 5.9% 4.5% 6.2% 6.0% 5.6% 5.5% 5.7% Cement and Clinker Imports 2.9% 15.9% 23.0% 15.1% 18.8% 22.1% 20.5% 21.4% Contact: Ed Sullivan, Chief Economist, PCA, (847)