Ed Sullivan Group VP, Chief Economist U.S Cement Outlook PCA Board Meeting Ed Sullivan Group VP, Chief Economist

Overview Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Portland Cement Consumption Thousand Metric Tons =

Composition in Cement Consumption Growth = Construction

Imports Are More Attractive Dollar Exchange Against Composite Baltic Dry Index

Cement Imports Thousand Metric Tons 2020: 20.2% 2017: 12.7% = Percentages are Imports Market Share

Cement SCM Usage at Plant Thousand Metric Tons 2020: 9.0% 2017: 8.5% 2002: 5.0% 2007: 5.3% 2015-2020 Equates to One 2MMT Plant = Percentages are SCM share of cement mix.

Capacity Utilization Rate Percent of Effective Capacity 2020: 82% = 2011: 61%

Economic Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Net Job Creation Thousands Monthly Net New Jobs State Fiscal Conditions Vacancy & Occupancy Rates ROI Lending Risks 2015 Average: 205K Net New Jobs 2015: 2.4 million 2016: 2.6 million

Unemployment Rate Index: 2000 = 100 Natural Rate of Unemployment 5% 4%

Inflation Rate CPIU Percent Change % Change, CPIU 2015: 0.4 % 2016: 2.0 % Fed Target Rate - Strong $ - Modest Domestic Utilization Rates - Weak Oil Prices - Slow Global Growth

Interest Rates Annual Percentage Rate Dual Mandate: Fed Actions to Raise Rates Are Expected to be Modest and from Low Prevailing Levels BAA Bonds Fixed Mortgage

Home Prices Total: Existing & New Most of Middle-Class Wealth is tied to Home Value Estimated Wealth Effect Impacts For Every $ of Wealth, Consumer Spending Increases: Equity: Adds 2-3 cents Home: 9-10 cents Newer Research Indicates Equity adds up to 15 cents and Home 7-8 cents

Consumer Sentiment Index: 2000 = 100 Past Cyclical Peak: 2006 at 88.5 Despite recent weakening, 2015 is up 10.7% over 2014 levels.

Consumer Propels Growth Solid job creation. Potentially stronger wage gains in context of 5% unemployment. Record low debt burdens. Lower energy/gasoline prices. Impacts price at pump & Oil heat (Northeast). Credit is cheap and becoming more available. Wealth is increasing – home and equity. Pent-up demand is real & eventually released Record light vehicle sales level. 3.3% to 3.5% growth in consumption.

Real GDP Growth Annual Rate 2014 = 2.4% 2015 = 2.4% 2016 = 2.6%

Portland Cement Consumption Metric Tons Per Million Real $ =

Portland Cement Consumption Metric Tons Per Million Real $ =

Recent Construction Data Trends Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Recent Construction Data Trends Index (2004=100) = Dodge - 29% Decline During Past 6 Months. Largest Decline Since December 2008. 21

Dodge Contract Awards - Current Index (January 2014=100) Private = 22

Dodge Contract Awards – Past Cycle Index (January 2015=100) Private = Public 23

Recent Construction Data Trends Index (2004=100) = Dodge - 29% Decline During Past 6 Months. Largest Decline Since December 2008. 24

The Market Problem Shift: Can’t Sell Them….to….Can’t Build Them Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Total Construction Employment 000 Workers -1,248,000 Workers, or -16.2%

Construction’s Skilled Labor Shortage

Anatomy of a Skilled Labor Shortage Recession hits construction employment hard. 2.9 million workers laid off, or almost 30% of construction employment. Older skilled, retire Some re-train leave industry. 500,000 Mexican born workers return to Mexico Long, slow recovery creates skills gap 6th year of economic recovery and only 4th year of construction recovery – leaving real construction activity 20% below 2005 past cyclical peak Technology improves during downturn years yet unemployed have no access State/local fiscal austerity measures cut high school shop and trade school funding Dim career prospects in construction force Millenials to snub trade Opportunities in Mexico improve Regionally, as construction demand improves to expose skills deficit.

Employment Declines % Change from Peak (2005)

Employment Declines % Change from Peak (2005)

Housing Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Single Family: Structural

Housing Assumptions: Millennials Aged 18-34 Form the basis of first time home buyers – the foundation for home construction growth. Millennials formed opinions on housing growing up during the crash, high foreclosures and home price declines. Millennials are saddled with huge student loan debt. Forming households later (3.3 million unformed) Millennials marrying later. Millennials forming families later. Structural issue. Not a cyclical issue.

Single Family Construction Employment 000 Workers -357,700 Workers, or -56.3%

New Home Inventory Month’s Supply

New Home Starts Labor Shortage Adjustments 5 Months Supply 5.5 Months Supply Reduces 2015 Growth by 1.8% to 3.0% 6 Months Supply

Housing Starts Thousand Starts =

Nonresidential Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Nonresidential Construction Million Real $ =

Oil Adjustments EIA Projections

Oil Prices & New Rig Count Total Rigs Oil Rig Count

Oil Adjustments Cement Consumption, MMT 2015: Reduces Total Cement Consumption Growth by 2.2%

1 Metric Ton Oil Cement = 2.9 Metric Tons Other Construction Cement Oil Price Impacts 1 Metric Ton Oil Cement = 2.9 Metric Tons Other Construction Cement

Public Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Public Construction Million Real $ Six Years Decline =

Federal Highway Spending Million Real 2009 Dollars = Baseline

Federal Highway Spending Million Real 2009 Dollars Senate Proposal House Proposal Baseline =

Federal Highway Spending Million Real 2009 Dollars Average House/Senate =

Cement Consumption Impact of New Federal Highway Spending Thousand Metric Tons =

S&L Sterilization Changes in Spending, Mil $ 88%

Direct Implied Baseline Cement Consumption Impact of New Federal Highway Spending Thousand Metric Tons Direct Implied Baseline = 50% Sterilized

Cement Intensities Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Cement Intensity Trends Cement Tons Per Million Real $

Cement Intensity Trends Cement Tons Per Million Real

Cement Intensities: Nonresidential Cement Tons Per Million Real 2009 $ 2015 = 72, or 65% of Past Peak 2020 = 85, or 77% of Past Peak = 2010 = 55 (-52%) or 49% of Past Peak

Composition in Cement Consumption Growth = Construction

Portland Cement Consumption Thousand Metric Tons =

Risks Downside: Upside: Economic Growth Slows to 2%: - 50 Basis Points (BP) Oil to $40: - 30 BP Housing starts growth cut in half: -100 BP Intensity remains stalled - 80 BP Upside: Highway Bill Passage: + 50 BP Pent-up demand release: +100 BP Intensity remains accelerates + 80 BP

Ed Sullivan Group VP, Chief Economist U.S Cement Outlook PCA Board Meeting Ed Sullivan Group VP, Chief Economist