Cement Americas provides comprehensive coverage of the North and South American cement markets from raw material extraction to delivery and tranportation to end user.
Issue link: https://cement.epubxp.com/i/49738
FEATURE FORECAST 2012 after resets have declined. This suggests that high levels of bank- possessed properties will remain on PCA's residential forecast esti- mates are well below the consen- sus of construction economists. If the consensus is correct, there is the potential of upside risk to our projections for housing starts ac- tivity and cement consumption. Consensus averages for single family starts compared to PCA projections upside risk of 800,000 metric tons in 2012 and nearly 2.0 mil- lion mt in 2013. In assessing this potential up- side risk, keep in mind that PCA agrees with the consensus that demographics will eventually push starts to a long-term trend level of 1.6 million to 1.8 million starts. This implies that during 2003- 2006, roughly a 1.5 million-starts overbuilding materialized. Since 2007, however, substantial pent- up demand has been generated by under building. The excess building has been completely ab- sorbed and pent-up demand of roughly 2.5 million to 3.0 million units currently exists. The building (below the 1.6 million- unit more pent-up demand. Some suggest continuation of under level) will generate even the combination of fa- vorable affordability levels and existence of pent-up demand will generate strong enough sales to draw down inventories in 2011 and 2012—prompting a more ro- bust starts recovery compared to PCA's outlook. PCA's more pes- simistic starts outlook reflects the timing of a release in housing de- mand—not the longer-term mar- ket potential. PCA believes the combination of modest job cre- ation, weak consumer confi- dence, tight lending standards and a difficult foreclosure envi- ronment are going to take some time to become favorable enough suggests potential to support more robust starts— even in the context of large pent- up demand and favorable affordability levels. PCA's outlook also implies larger pent-up demand balances will be ready for release in the back end of the forecast. The long-term trend of 1.6 million units is reached in 2015. There is one final wrinkle to the residential forecast. High debt, joblessness and the large amount of foreclosures will dam- age credit for many potential new home buyers. Furthermore, sub- stantively easier standards and/or the re-emergence of a sub-prime credit market is unlikely to materi- alize anytime soon to accommo- date potential homebuyers with damaged credit. This implies a gradually higher proportion of starts going toward rental units. This is incorporated in our forecast. Keep in mind, a typical single fam- ily unit consumes 19 mt of cement. In comparison, a multifamily unit consumes roughly 9 mt. The McGraw-Hill Construction forecast sees single family hous- ing in 2012 improving 10 percent in dollars, corresponding to a 7 percent increase in the number of units to 435,000 (McGraw-Hill Construction Dodge basis). This is still a low amount, as the excess supply of homes due to foreclo- sures continues to depress the market. Multifamily housing will rise 18 percent in dollars and 17 percent in units, continuing its moderate, upward trend. NONRESIDENTIAL REBOUND TIED TO LABOR MARKET RECOVERY Several issues confront a recovery in nonresidential expected return on investments (ROIs) and con- struction activity, including de- pressed occupancy and usage rates, soft leasing rates, declining commercial asset prices and tight lending standards. Job creation, www.cementamericas.com • November/December 2011 • CEMENT AMERICAS BUILD ON OUR EXPERIENCE BULK TRANSFER FACILITIES CONCRETE SILOS STEEL SILOS CONVEYING SYSTEMS STEEL ERECTION STEEL FABRICATION CRUSHING SYSTEMS PROCESS DESIGN ASI-INDUSTRIAL.COM asi@asi-industrial.com P 406.245.6231 F 406.245.6236 13