Concrete Products

JAN 2015

Concrete Products covers the issues that attract producers of ready mixed and manufactured concrete focusing on equipment and material technology, market development and management topics.

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54 • January 2015 www.concreteproducts.com FEATURE MARKET OUTLOOK "The U.S. portland cement market is expected to grow 8.2 percent in 2014, followed by similar rates of growth in 2015 and 2016," says Portland Cement Association Chief Economist and Group Vice Presi- dent Edward Sullivan, who adds that minor adjustments to his latest outlook have been made regarding the construction sub-sectors, in particular housing starts, which have been trimmed slightly com- pared to forecasts released earlier in 2014. Sullivan expects total 2014 cement consumption (portland and masonry) to reach 88.6 million metric tons, followed by 95.7 million metric tons in 2015 and 103.3 million metric tons in 2016. While single-family housing starts are not reaching projected levels, his forecast indicates a new emphasis on multifamily starts. Demographic trends and the still strict mortgage standards are push- ing more potential homebuyers into rental units. Additionally, the oil price environment has changed significantly since summer 2014, and these new impacts have been integrated into the forecast projections for the paving sector. Going forward, Sullivan believes that the underlying economic fundamentals are strengthening and reflected in the labor market. Sustained gains in monthly job creation in excess of 225,000 net new jobs monthly, in the context of sub-6 percent unemployment, trans- lates into more consumer spending power, stronger state and local tax receipts, more favorable ROIs for commercial building, and stronger household formation—all leading to stronger construction spending in 2015. Through October, year-to-date cement consumption was up 8.6 percent. October's sales pace exceeded a 90 million ton seasonally adjusted annual rate—the third time during the past four months. Through the past several years, it can be argued that the cement mar- ket has engaged in a "step-wise" recovery, reaching a certain sales pace, remaining at that plateau, and then jumping to a higher sales pace and resting on that plateau and jumping again. During the second half of 2013 through the first quarter this last year, for example, cement consumption floated consistently around an 80 million-metric tons seasonally adjusted annual rate (SAAR). Rather than reflecting a trend projection, cement consumption took a step up to the 85 million-metric tons SAAR pace during the second quarter. Now the pace of consumption seems to have reached a new, higher level near a seasonally adjusted 93 million-metric tons level. It should be noted that November and December 2013 were charac- terized by harsh weather. Absent a recurrence, strong year-over-year gains are anticipated in final 2014 figures. The strengthening of the U.S. job market lies at the core of Sul- livan's optimistic outlook regarding the economy, construction mar- kets and expected cement volumes in the years ahead (his 2019 total cement consumption forecast tops 124 million metric tons). The monthly job creation rate averaged 225,000 net new workers for 2014. This pace is expected to be roughly maintained through the first half of 2015. During the second half of 2015, the monthly job creation rate is expected to edge up to 250,000 net new jobs, or a 3 million-job annual pace. These favorable conditions are further supported by the recent col- lapse in oil prices. In mid-September 2014, West Texas intermediate was priced at $94 per barrel; by mid-November, the price had declined $20, due to easing global demand and a ramp-up in U.S. production associated with fracking activity. The run-down in oil prices has mate- rialized in a steep drop in prices at the pump so far, adding even more to consumer purchasing power. BUILDING BACK TO NORMAL Despite a late 2014 construction season start, U.S. cement consumption totals are expected to soar past 95 million metric tons in 2015 by the editors of Concrete Products

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