The year 2016 was an eventful one for home building.
Cement Stays Solid
The Portland Cement Assocation’s chief economist provides an update on the state of the cement industry.
The cement industry was privy to record numbers in 2005, moving more than 121 million metric tons of Portland cement — a 5.6 percent increase over 2004 numbers. (2004’s numbers: http://money.cnn.com/2004/08/09/news/economy/cement_shortages/index.htm) Despite the recent housing decline, the demand for cement will not change much in the coming years, according to the latest projections from the Economic Research department at the Portland Cement Association.
The latest forecast, presented via Web cast by PCA Chief Economist Ed Sullivan, states cement consumption for 2006 will show a modest increase of .6 percent. Those numbers will flatten to a growth of .3 percent in 2007 with the numbers returning in 2008 when cement consumption is projected to increase by 2.7 percent, Sullivan says. (Portland Cement Association’s Fall Webcast: http://www.cement.org/newsroom/Fall_Forecast110106.asp)
"Our forecast projects that cement intensities will increase by two percent, fueled by a favorable relative price position as well as a shift toward higher cement usage in construction projects," Sullivan said. A growth in building in the areas affected by Hurricane Katrina will also contribute to the upswing in cement activity.
The industry itself, though posting record numbers in recent years, had to play a game of catch-up. According to Sullivan, in 2004 and 2005, 30 states were hurting for cement. In 2006, zero shortages were reported. Imports, particularly from Asian countries like China, increased in 2006. "Thirty-three and a half million tons were imported from China alone," says Sullivan, "We're looking at about a 42-million ton per year rate now, which has corrected some lean inventories. Freight rates declined for a period, but the market will undergo some self-correction and imports will even out."
Additionally, the PCA fall forecast does not expect the sharp decline in housing to continue at the current rate, as a correction may be just around the corner. "We don't know the magnitude of this housing decline. We're looking at 2008 for things to get better. My guess is that demand will be a little bit better over 2005," says Sullivan.
But the demand won't be shared evenly. The Great Lakes region, Sullivan says, may experience some problems with cement supply. Naturally demand is lower where the economy is not doing as well, especially around Detroit and in Indiana and Ohio. Economies out West, especially in Texas and Colorado, are becoming more dynamic, fueling the need for cement. And in these dynamic markets, Sullivan points out new cement plants are being built. "I think manufacturers are looking at the transformation of American demographics. Each cement plant has about a 250-mile radius, and there aren't as many plants in the dynamic markets of the U.S."
In non-residential applications, much more cement is needed for each application and, according to the PCA, that's what will offset the 2 percent decline in builder demand.
Says Sullivan: "Everything is back in balance. No shortages and no overhangs, either. But there's a lot of uncertainty out there. We have to wait and see what the housing market is going to do and what kind of strength is the economy going to show."
More on the cement industry: http://www.csmonitor.com/2004/0817/p03s02-usec.html