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2006-09 Markets Drive Worst Post-War Cement Consumption Slide

A downward revision in construction activity outlined in the latest PCA forecast suggests that U.S. portland cement consumption over a four-year period will bring the worst decline, on a percentage basis, since the Great Depression

Source: Portland Cement Association, Skokie, Ill.
A downward revision in construction activity outlined in the latest PCA forecast suggests that U.S. portland cement consumption over a four-year period will bring the worst decline, on a percentage basis, since the Great Depression. In 2008, powder consumption is expected to drop 11 percent, followed by an additional 5.5 percent in 2009. PCA predicts total cement consumption this year and next falling to 101.7 million and 96.1 million metric tons, respectively. When weighed against the industry's record consumption of 128 million metric tons in 2005, the immediate outlook spells a peak-to-trough powder shipment decline hovering at an unprecedented 30 million metric tons.

"We are currently in the third year of a four-year industry contraction," says PCA Chief Economist Edward Sullivan. "High fuel prices, slow job creation, and tight lending standards will all adversely impact the entire spectrum of construction activity." While harsh residential building conditions continue to act as a significant drag on cement consumption, he adds, the nonresidential sector will also see large declines for the next two years.

Although it grew nearly 11 percent in 2007, nonresidential construction spending is expected to fall almost 8 percent in 2008 and another 12 percent in 2009. Nonresidential construction is closely tied to economic activity. As the economy softens, the expected return on commercial investments decline, reducing the incentive to build and expand," Sullivan affirms.

An additional slowdown in public construction, which accounts for nearly half of total U.S. cement consumption, is predicted for 2009 and will continue through 2010. PCA projects the second half of 2010 ushering a period of strong growth in cement consumption, with all U.S. regions poised for a recovery in housing and nonresidential construction activity.