US cement consumption growth could hit 5% in 2019 and 7.7% by 2020 on the back of policy initiatives by the Trump Administration, according to Ed Sullivan, Senior Vice President and Chief Economist at the Portland Cement Association (PCA). Consumption will remain under its 2005 peak of over 120 million t, however.
Giving his annual ‘State of the Industry’ presentation at this year’s IEEE-IAS/PCA Cement Industry Conference in Calgary, Canada, Sullivan highlighted a number of proposed Trump policies that would – if passed – increase demand for cement, including tax reform and increased infrastructure spending.
These policies will begin to take effect in 2019, when cement demand growth will spike to 5% from around 3.5% in 2017 and 2018. Up to 2019, demand will be supported by sound economic fundamentals, Sullivan said, underscored by tightening labour markets, low interest and inflation, which will drive consumer spending.
Despite the strong consumption growth, cement demand will remain well within current capacity for the foreseeable future. Current capacity includes existing clinker production, as well as growing supplementary cementitious material addition and import capacity.
On current trends, increasing imports would be more attractive that capacity expansions, Sullivan added, pointing to the low dollar and low freight rates on the dry bulk market. The proposed Border Adjustment Tax (BAT) may change that equation, however; current proposals from US Congress, would place a 20% BAT on imports into the US.
Speaking to World Cement on the sidelines of the conference, Sullivan was unwilling to speculate on the proposed BAT’s impact specifically on the cement industry, citing PCA’s policy not to comment on trade matters.
On the macroeconomic impact of the BAT, however, Sullivan was skeptical of the theory that a BAT-related strengthening of the dollar would completely offset the tax’s impact. “My guess would be that it will raise overall prices,” Sullivan said, and thus have an adverse impact on the economy.
Cement demand will also not keep up the high levels of growth after 2021, as inflationary pressure builds on the back of Trump’s policies, causing a likely interest-rate response from the Federal Reserve. This will hit the construction industry, which is particularly sensitive to interest rate rises.
In the long-term, Sullivan noted that continued population growth will continue to underpin cement demand, with baseline demand approaching 160 million t by 2040. It is only by this point, however, that new capacity may be required.
Read the article online at: https://www.worldcement.com/the-americas/31052017/us-cement-demand-growth-to-spike-at-77-in-2020/