US cement market to begin slow climb

By Steve Skinner08 October 2009

Cement consumption in the US fell by -30% in the first six months of the year, but Portland Cement Association’s (PCA's) chief economist, Ed Sullivan believes the industry's now bottomed out and consumption should begin to climb.

"The fall in the first half follows double digit declines in both 2007 and 2008," said Mr Sullivan. "In terms of volume, we've experienced the largest decline in US history, down 50 million tonnes from the 2005 peak.

"Although I'm not very optimistic about the future, I do expect gradual improvements over the next 12 months," he said. "However, we don't expect moderate to strong growth until the second half of 2010."

The PCA believes that cement consumption will be shaped by government policy over the coming years, especially by the American Recovery and Reinvestment Act (ARRA), although the association also fears that due to the harsh economic conditions being faced by State and local government, stimulus funding could be "partially sterilised".

"The underlying fundamentals that put us into recession will remain in play through the first half of 2010," said Mr Sullivan. "I believe the ARRA stimulus will only offer marginal relief, so we can only really expect meagre economic growth until the fundamental issues abate."

The PCA believes there's a 45% probability of a slow and sustained recovery but also warns that there's a 30% chance the US could face a double dip recession, with a second low point being hit as the stimulus funding wears off in 2011.

"There is a chance the weak fundamentals could take over again and cause a second recession," said Mr Sullivan.

"The current recession is unique, it's not just a cyclical decline, and as such it's hard to make predictions," he said. "I believe once the economy gains traction, then pent-up demand for residential, non-residential and State infrastructure will be released, which will lead to strong jobs growth in the future."
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