Global Cement Network published an interview with Ed Sullivan, chief economist of the Portland Cement Association (PCA) in May. The main contents are as follows:
& emsp; & emsp; Q1: Current status of the cement industry in the United States?
A: Cement production in the United States grew strongly in 2017, up 2.5% year-on-year. Looking ahead, we expect growth of 2.8% in 2018 and 2019, respectively. Our expectations for the economy are optimistic, and with the tax reform bill, the economy will be stronger. There is also a budget for infrastructure-on top of the $1 trillion infrastructure bill.
Against a strong economic backdrop, fiscal stimulus is gradually benefiting the construction sector and will continue in 2018 and 2019. Then, in the last quarter of 2019, we will see the beginning of Trump's $1 billion infrastructure bill.
Q2: How did the cement industry perform in each region in 2017?
A: There was a lot of growth in cement sales west of the Mississippi last year, for example, along the Pacific Coast and in the mountains. These areas were hit hardest when the housing bubble burst. The wound is deep and will take some time to heal. These regions will also have the strongest growth in 2018.
& emsp; & emsp; The eastern region was least affected by the housing bubble. Thanks to a stable and stable population, as the national economy contracts and grows, the volatility of the economy is reduced.
Table 1: Cement consumption
by region in the United States Data source: PCA, Cement Big Data Research Institute
& emsp; & emsp; As shown in the figure below, the darker the green, the higher the growth rate; conversely, the darker the red, the largest decline in cement consumption in the region. In the western region, the power of growth is amazing. There were double-digit increases in some States, such as Oregon, where sales increased by 13.3%. And the growth in demand for cement is limited by labor shortages that would otherwise grow even faster. Similar problems exist in the South, Texas, and the Southeast.
Figure 1: Year-on-year percentage
change in cement consumption by region in the United States in 2017 Data source: PCA
< br/>
Q3: How did the bad weather affect sales?
& emsp; & emsp; A: Last year, there were some very serious wildfire incidents in California and Florida. These are major events that affect the local economy in the short term. But then the temporary interruption was quickly repaired. In the coming months and years, damaged areas will have to renovate and rebuild damaged buildings and infrastructure, which will boost cement demand. In addition, due to the cold winter in the northeast, cement consumption is seasonal and usually does not consume a large amount of cement.
Q4: What was the situation at the beginning of this year?
& emsp; & emsp; A: In January-February, the winter was particularly harsh in some regions, affecting demand in those regions and the country as a whole. In the first two months, sales actually fell 4% year over year. First quarter volume is generally the lowest of the four quarters, which means that small changes have the potential for relatively large percentage changes, so it may not be accurate to use this indicator as a bellwether for the whole year. We hope things will continue to develop.
Q5: What has been the impact of Trump's tenure so far?
A: There are many aspects. On the positive side, the US government has introduced tax reforms that will stimulate demand in the short term. In terms of regulation, the industry will reduce regulation, which will also help improve cement demand. In the long run, there is also the infrastructure bill. In addition, there is a trend to improve the utilization of funds for infrastructure. This means that concrete pavements are likely to be more popular because they are more durable than asphalt, a clear advantage for the cement industry.
In terms of risk, Trump has launched a destructive trade war. If tariffs get out of hand and there are retaliatory actions, the cost of all consumer goods will increase. This will reduce demand in regions that depend directly on commodities. If it develops into a full-scale trade war, GDP growth in 2018 will be reduced from the expected 3.0% to about 2.4%. We may lose 2 million tons of cement demand. Another threat is that we are stimulating an economy that already has only 4% unemployment. This will increase the risk of inflation, and the Fed will have to respond by raising interest rates. On the one hand, the construction industry is sensitive to interest rates and will be hit. In the medium term, the boom-bust cycle is a real threat. Higher interest rates, on the other hand, would strengthen the dollar and make imports more attractive, to the detriment of local cement producers.
& emsp; & emsp; Q6: What is the biggest downside risk to the short-term forecast you provided earlier?
& emsp; & emsp; A: The first risk of all these predictions is a trade war. We're talking about risks not just to the U.S. economy, but to the global economy. The long-term risk is that the Fed has to respond to overheating and has to slow growth. It must be remembered that Trump asked the States and private companies to fund more than 80% of the infrastructure bill, with the federal government funding down to 20%. States, however, will always be more willing to pay for Medicaid and welfare programs than to build a new road. So in our view, this way of funding the infrastructure bill is not going to work. In light of this, we have substantially reduced the impact of Trump's infrastructure bill in our 2018 forecast.
Q7: How much growth will the economic development and tax bills bring to the construction and cement industries, respectively?
A: About one third from the previously strong economy and two thirds from the tax reform bill. We surveyed major financial advisory groups about what the impact of these changes would be on GDP. According to the data provided by them, we calculate that the size of the construction industry will account for 6% of GDP, and then predict the sales volume of cement.
Q 8: Does PCA have a long-term forecast of cement demand?
A: Based on the rapid growth of population and the increase of urbanization rate, we estimate that there will be 160 million tons of cement demand in 2040. These data will be updated every two years, and we will look at this figure in the third quarter of 2018.
(Translated and edited by Wei Yu, Cement Big Data Research Institute)
浙公网安备33010802003254号