Cement/Concrete Outlook: 2011-2015 CEA March 2011 Ed Sullivan, Chief Economist PCA Named Most Accurate Forecaster By Chicago Federal Reserve, 2009

Portland Cement Consumption: Fall Thousand Metric Tons Growth Rates 2007: - 9.6 2008: - 15.1 2009: - 26.9 2010: + 0.7 2011: + 1.3 2012: + 3.7 2013: + 16.6 2014: + 18.0 = Early 2011 Characterized by Large Y-O-Y Percentage Gains PCA believes this will be a false read for 2011 Performance

Cement Capacity Utilization Percent Capacity Utilized Excess Capacity, Depressed Earnings =

Economic Outlook

Economic Adversity Abates 2011/12 2006 2007 2008 2009 2010 2011 Sub-Prime/Exotics Energy The abatement of the conditions that put us in recession…are receding…but remain in place. Lending Standards Labor Markets State Deficits

Synchronized Recovery Theory Job creation determines how quickly the recovery cycle spins. Incremental Demand Gains Job Gains Sentiment Gains Lending Standards Ease & Hiring Accelerates Heals Structural Restraints In the context of moderating productivity Gains Leads to: Defaults & perceived lending risks decline Sentiment includes Consumer, Business & Banks:

Housing Recovery

Foreclosures Accelerate Foreclosure Impacts Add to Inventory Depressed HomebuilderROI Depress Prices 2.8 Foreclosures in 2009. 871K Bank possessions. Equates to one out of every 4 homes on the market. Adds supply. Bank owned properties discounted. Pressures new home prices. Longer carry costs. Lower revenues. Erodes expected ROI. Delays recovery in starts.

Residential: Re-Set Scenario $ Billion Alt-A Subprime Resets Option Adjustable =

Nonresidential Drag

Nonresidential Conclusions No longer a significant drag on construction activity. Large imbalances exist in before a positive NOI materializes Slow job growth implies slow healing process Credit environment hostile. Conditions for positive ROI years off. Not a significant contributor to cement consumption growth until 2013

Office Buildings: Recovery Process New Office Hiring Vacancy Rates Decline Leasing Rates Stabilize Credit Troubles Ease Asset Prices Firm Leads to a recovery in office construction. 1/5 of all jobs in the office. Defaults & perceived lending risks decline After reaching threshold of roughly 14% vacancy rate

Since 1 in 5 Jobs Are In The Office Office Buildings Recovery Timing 32.0 Million Office Jobs Equates to Full Occupancy 27.5 Million Office Jobs Equates to Stable Leasing Rates 27.0 Million Office Jobs Today Implying….. 500,000 Office Jobs must be created before leasing rates stabilize Since 1 in 5 Jobs Are In The Office This equates to a total job creation number of roughly 2.5 million Jobs This condition may not materialize until 2012

Nonresidential Construction Projections Billion Real $1996 =

Public Recovery

ARRA Spending Composition Assumptions Billion $   ARRA Spending Composition Assumptions Billion $ = Resurfacing Widening & New Route Bridge Chart Excludes “Other” Spending

State Fiscal Conditions FY 2011 Budget Gaps ME RI MA VT NH AL GA SC TN FL MS LA TX OK NM KS MN IA MO AR WY CO ND SD NE WA ID MT OR NV UT AZ CA WI IL IN MI OH KY WV VA NC MD DE PA NY CT NJ HI Source: PCA/CBPP Oct. 2010 No Shortfall Under 11% 11%-20% Over 20%

State Deficits $ Real Slow Job Creation Leads to Slow Deficit Heal = National Estimates: States Do Not Heal in a Synchronized Fashion

Discretionary State Highway Cement Consumption Thousand Metric Tons =

“New Normal” or “New Headaches” Beyond the Crisis “New Normal” or “New Headaches”

After the Crisis: “New Normal”: Construction Not a typical recession recovery. Amplified by structural corrections. Amplified by possible policy errors. Long impacts Pent-Up Demand Being generated across all sectors. Longer period of distress, more pent-up demand Timing and magnitude of release impacted by economy. Regional impacts from resulting growth. Residential, nonresidential & public synchronized – 2013 & Beyond. Typically suggests strong cement consumption growth rates.

Real Construction Spending Billion Real $1996 =

After the Crisis: “New Normal”: Global Emerging economies, led by China/India, account for key growth drivers. Accounts for larger share of world GDP than OECD by 2014 (IMF). Exerts “new” potent demand on world markets “Synchronized” world growth returns 2013-2020. Commodity prices (oil), freight rates, trading patterns subject to change. Impacts concrete competitiveness (oil prices = paving position, residential ICF) Impacts sourcing decisions – high freight rates raising import costs. New challenges could lead to potentially new economic/political tensions.

Announced New Coker Installations Cumulative: Thousands of Barrels Per Day

Parity Achieved in Fiscal 2009 Projected: Initial Bid Concrete Vs Asphalt Paving Costs Per Two Lane Road Mile - Urban Asphalt Concrete Parity Achieved in Fiscal 2009

After the Crisis: “New Normal ”: Material Selection Process Focus on federal & state deficit reduction. Restructure of entitlement programs politically toxic. Focus shifts on spending efficiency. State Spending on transportation accounts for $120 billion annually. Structural factors in state DOT material selection process inhibit free market decisions regarding the lowest cost (initial bid and life cycle) from being realized. Escalators, Alternative Bid Inhibitors cost states billions annually – to the detriment of other spending priorities.

After the Crisis: “New Normal”: Regulation Activist EPA Plant shut downs High compliance costs. New Source regulations! Resumption of demand growth Import Dependence Grows In context of weak dollar In context of emerging economy demand growth Higher freight rates. Sourcing strategies Near term, import dependence – longer term?

Cement Consumption: Long Term Million Metric Tons Growth in Context of Population Changes, Slower US Economic Growth, Strong Global Growth, Climate Change Legislation and the “Green” Revolution.

Cement/Concrete Outlook: 2011-2015 CEA March 2011 Ed Sullivan, Chief Economist PCA Named Most Accurate Forecaster By Chicago Federal Reserve, 2009