U.S. construction activity and cement consumption will experience significant declines this year, according to a recent Portland Cement Association economic research report. Portland cement consumption is expected to drop 10% in 2008, followed by an additional 3.6% decline in 2009. Total 2008 cement consumption is predicted to be 102.7 million metric tons.
“High fuel prices, acceleration of home foreclosures, and the impact of the sub-prime crisis on credit standards are some of the current conditions that lead us to believe the economy is already in a recession,” according to Edward Sullivan, PCA's chief economist. “Even when there is recovery later this year, it will not immediately affect the construction and cement industries.”
Sullivan anticipates high home inventory levels to depress the residential sector until the second half of 2009, causing a 26.5% decline in housing starts for 2008. The nonresidential sector, which is closely tied to economic activity, will fall 7%.
“Nonresidential construction typically takes 18 months for recovery. This figure implies further declines in 2009, coupled with a slowdown in public construction activity during the same period,” Sullivan said.
According to the PCA report, in the second half of 2009 the economy will gain strength as residential inventories are burned off and credit terms ease. This market change will lead to a 5.2% growth in cement consumption in 2010, followed by an even stronger gain in 2011.