Ed Sullivan, Chief Economist PCA Cement Outlook: 2009 Ed Sullivan, Chief Economist PCA
Introduction: Overview Economic fundamentals are deteriorating quickly. Outlook shaped by policy actions. Details and size of the stimulus plan are fluid and still subject to considerable change….adds risk to PCA projections.
Net Job Creation (Loss) - Annual Change, Thousand Net Jobs = Job Loss 2009 = 4.1 Million Job Loss 2010 = 1.8 Million Unemployment Peaks at 10.5% Early-2010
Economic Policy Actions
No Stimulus Job Loss Estimates Million Jobs 2008 2009-2010 2009-2010 Obama Economists PCA
Introduction: The Need for Stimulus Obama’s $775 billion plan may not be enough. Obama economists expect an additional 2.8 million jobs lost. And plan aimed at creating /saving 3.7 million jobs. PCA estimates that 8.5 million jobs may need to be created/saved. Stimulus plan required = $1.2 trillion. House Appropriations = $825 billion – size of stimulus increasing in recognition of greater economic adversity. More increases required… but …taxpayer backlash may hinder size and hence economic outcomes.
“Stimulus Timeline Phase I Phase II Phase III 2011 2009 2010 Policy Tool Objective 2009 2010 2011 Job Saving Job Creating Tax Cuts, Entitlement Spending, State Aid Stabilize Economy, halt adverse momentum Phase I Shovel Ready Projects Job Creation Phase II Job Creation, Address Structural Economic Issues Long Term Investments Phase III
Economic Growth Outlook Percent Change, GDP Growth Rate Recession Scenario: With Stimulus Recession Scenario: No Stimulus
Stimulus: GDP Impacts 2009-2010 2009-2010 Change in GDP From No Stimulus Scenario Obama Economists PCA 2009-2010 2009-2010 GDP 4th Q 2010: $12.2 Trillion GDP 4th Q 2010: $11.6 Trillion Note: Stimulus in PCA Outlook Overlaid upon weaker Fundamentals.
Stimulus: Job Creation Estimates Million Jobs Obama Economists PCA 2009-2010 2009-2010 Unemployment: 8.8% Unemployment: 7.0% Job Estimates have large impacts on Cement/Concrete recovery assessments.
“Shovel Ready” Timeline Jan Feb March April May June July August House Bill Obama Inaugurated Job Creation May Come Later Than Many Expect Senate Passes & Bill Signed Federal Paperwork State Paperwork Bid Letting Bid Review Contractor Paperwork Construction Begins
Stimulus: Infrastructure Job Creation Estimates Percent Job Premium Compared to A Resurfacing Reconstruction, Capacity New Bridge New Route Major Widening Bridge Replacement Concrete Intensive Projects Create More Jobs Than Resurfacing
Portland Cement Outlook Thousand Metric Tons Projections With Stimulus Projections Without Stimulus =
Stimulus Payback in context of Global Recovery Beyond the Crisis Stimulus Payback in context of Global Recovery
Introduction: Overview Cyclical correction is temporary.
Payback & New Realities Stimulus Initiatives: $700 billion financial bailout. $800 billion fiscal spending/tax cuts. Tax increases & higher long term interest rates are likely outcomes during 2012 and beyond. Global recovery implies increases in oil prices. EIA expects oil prices to reach $126 per barrel by 2013. Green is coming!
Cement Consumption: Long Term Million Metric Tons
Single Family Housing– United States 000 Starts Pent-Up Demand = Housing Peaked January 2006 2007: -29% 2008: -37% 2009: 0.0% 2010:+34% Interest Rates low, Decline in Home Price, Job Recovery Translate into Improved Affordability Excess Inventories Worked Off
Per Home, Lifetime C02 Savings ICF Home Over Frame Co2 Metric Tons, Per Home Total Heating & Cooling C02 Saving: 92 Tons per Home Additional C02 Emitted by Cement Production Conservatively Assumes 50 Year Life of Home
Potential “Green” Gains: ICF & Related Systems Incremental Gains in Cement Consumption, Metric Tons 30% 25% 20% 10% of Total Housing Starts 2030: Housing Starts Average 1.9 Million Annually. ICF & Related Systems Reach 30% Market Share
Highway Lane Miles Thousands of Miles Just to Maintain Current Highway Congestion Levels, Federally Aided Highways Must Expand Nearly 25% by 2030 . Given 49 Million Additional Licensed Drivers.
Gasoline - Asphalt Margin Per Barrel Differential - Net Threshold of $14 Per Barrel Price Differential Per Barrel Threshold Differential = $14 per barrel Estimated on a Ten Year Payoff for Coker Investment
Announced New Coker Installations Cumulative: Thousands of Barrels Per Day
Liquid Asphalt Supply Thousands of Barrels 44 Million Barrel Decline by 2011
Concrete Advantages Materialize in Fiscal 2009 Projected: Life Cycle Concrete Vs Asphalt Paving Costs Per Two Lane Road Mile - Urban Asphalt Concrete Concrete Advantages Materialize in Fiscal 2009
Ed Sullivan, Chief Economist PCA Cement Outlook: 2009 Ed Sullivan, Chief Economist PCA