Cement Americas provides comprehensive coverage of the North and South American cement markets from raw material extraction to delivery and tranportation to end user.
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FEATURE FORECAST 2012 state budget surpluses material- ized. This year's data suggests the ratio is 2.0 percent, well above ex- pectations. The increase in 2011 state discretionary highway spend- ing was unexpected and may sug- gest state spending actions in 2012 and 2013 as ARRA spending con- tinues to dissipate. PCA's incorpo- rates higher state highway spending into its forecast. President Obama has proposed a jobs bill that includes additional infrastructure spending. Highway spending in this proposal roughly equals the dollar levels of the ARRA stimulus. Even if the bill were passed tomorrow, adminis- trative lags, similar to those en- countered with ARRA, would prevent any meaningful additional construction spending from mate- rializing in 2012 or even early 2013. Likewise, the potential ben- efits of an infrastructure bank, also included in the Obama proposal, will take time to set up and imple- ment, therefore, the benefits to construction may not materialize until 2013 or later. PCA has not in- cluded the Obama proposal into its forecast estimates. McGraw-Hill Construction be- lieves public works construction will drop a further 5 percent in 2012, after a 16 percent decline in 2011, due to spending cuts and the ab- sence of a multiyear federal trans- portation bill for bridge construction. highway NEW PAVING TAKES HOLD? During the five years preceding the recession, residential and nonresi- dential construction accounted for 56 percent of total cement con- sumption. Since the recession began, these sectors' contribution to cement consumption declined to less than 48 percent. Given the weakness in the private sector dur- ing the downturn, cement con- sumption became increasingly dependent on the public sector, ac- counting for more than half of all cement consumption. As the economy recovers, the private sectors will gradually ac- count for a higher proportion of total cement consumption, particu- larly in light of political conditions hindering increased infrastructure investment. The current forecast suggests that the recovery in the private sector will be tepid. Com- pared to historical trends, this im- plies that the public sector will play a larger role in total consumption throughout the forecast horizon. No public sector is more important than highway cement consumption, accounting for roughly 70 percent of total public consumption. Until recently, asphalt enjoyed a and lower "initial bid" and, according to some, a life-cycle paving cost ad- vantage compared to concrete. Given these cost advantages, as- phalt paved roads captured roughly 94 percent of all pavements in the United States. The environment and dynamics of world economic growth that resulted in asphalt's paving cost advantage no longer exists, says PCA. The world econ- omy has permanently changed with the emergence of strong growth among lesser developed and tran- sitional economies. Economic growth among these countries translates into new demand for commodities, such as oil. www.cementamericas.com • November/December 2011 • CEMENT AMERICAS Since asphalt is a byproduct of oil refining, the new global reali- ties suggest that asphalt's long- held paving cost advantage over concrete has not only eroded, but also has already reversed. This re- versal has been amplified by changes in oil refining processes and further raising the cost of as- phalt. The changes in the compo- sition of world economic growth that have ushered in the new paving cost dynamics are just be- ginning. Increasingly, the longer- term global economic trends suggest that concrete will enjoy a substantial paving cost advantage over asphalt. These new paving realities may already be taking hold. Based on recent data analysis, concrete's share of the paving market has in- creased from an average 13.5 percent prior to concrete's initial bid cost advantage (2003-2008) to an average of 15.3 percent (2009-2011). The increase in mar- ket share translates into incre- mental cement consumption of 337,000 mt in 2009, 232,000 mt in 2010 and 111,000 mt through the first two quarters of 2011. Keep in mind, Oman data repre- sents a subset of the entire paving market, and as a result the volume gains associated with con- crete's enhanced ompetitive posi- tion could be even larger. 17