Cement intensity increases expected to soften decrease in consumption

News Portland Cement Association November 10, 2006
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According to the most recent forecast from the Economic Research department at the Portland Cement Association (PCA), although cement consumption is not projected to decline, only marginal gains are expected.

The fall forecast, presented last week at the PCA board of directors meeting in Sea Island, Ga., by chief economist Ed Sullivan, revises cement consumption growth for 2006 to an increase of .6%. An even more modest growth rate of .3% is expected in 2007 with more robust trends returning in 2008 when cement consumption is projected to increase by 2.7%.

The flattening of the market, according to Sullivan, is the combined result of the decline in the housing industry and softer overall economic conditions.

"In recent years the U.S. and the cement industry have experienced unprecedented growth," said Sullivan. However, construction activity is starting to soften and this will create an adverse impact on cement consumption."

Sullivan sees cement intensity growth as key to market growth during the next couple of years. Cement intensities refer to the tons of cement per dollar of construction activity.

"Our forecast projects that cement intensities will increase by 2% in 2007, fueled by a favorable relative price position versus asphalt and steel, as well as a shift towards higher-cement-usage construction projects," Sullivan said. "Code changes in hurricane-prone regions, improved concrete products, and concrete growth as a 'green' building material will all contribute to this despite a decrease in construction activity."

Additionally, the PCA fall forecast does not expect the sharp decline in housing to continue at the current rate. Sullivan says the recent downward change in the housing market was driven by the departure of speculators from the market. Their exit will actually help introduce a correction to housing prices and improve affordability for the average homebuyer.

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