Cement Outlook Ed Sullivan, Chief Economist PCA PCA Spring Meeting April 2012

Cement Consumption: Review DecJanFeb Month’s Consecutive Growth

Cement Consumption: Weather SAAR DecJanFeb 1958

Cement Consumption: Weather SAAR

Portland Cement Consumption Thousand Metric Tons 3.0%3.7%7.4%13.8%11.7%8.3%

Total Construction Outlook $ Billion, Real -5.4%3.3%7.2%14.0%10.8%8.4%

Cement Intensity: The Cycle Cement Tons Per Million $ Real Construction Spending

Cement Consumption Growth Number of States States Recording Declines States Recording Gains States Recording Double Digit Gains

Economic Outlook

Synchronized Recovery Theory In the context of moderating productivity Gains Leads to: Sentiment includes Consumer, Business & Banks: Defaults & perceived lending risks decline Job creation determines how quickly the recovery cycle spins.

New Hopes: Net Job Creation Annualized Net Job Creation 2.7 Million Annualized 3 month Moving Average 2.4 Million Annualized 3 month Moving Average

Job Creation Link to Sentiment Job Creation Consumer Sentiment

Job Creation Link to Sentiment Job Creation Consumer Sentiment

Job Creation Link to Sentiment Job Creation Consumer Sentiment

Job Creation Link to Sentiment Job Creation Consumer Sentiment

Housing Recovery

Residential Cement Consumption Thousand Metric Tons MMT 55% of Total Cement Consumption decline is attributed to residential

Residential Assessments Stronger labor markets & affordability. Foreclosures increase in  Inventory improvement is gradual, prices decline in 2012.

Foreclosure Estimates Million Homes Actual : Foreclosure Improvement a Mirage. 1.5 Million Delay Will Materialize in

Residential Assessments Stronger labor markets & affordability. Foreclosures increase in  Inventory improvement is gradual, prices decline in Most troubled SF markets assumed at trough.  No drag on starts. Regional SF markets begin recovery in 2012.

Single Family Starts Thousand Starts

Residential Assessments Stronger labor markets & affordability. Foreclosures increase in  Inventory improvement is gradual, prices decline in Most troubled SF markets assumed at trough.  No drag on starts. Regional SF markets begin recovery in Multifamily sustained growth.  Household formation expands, troubled tenant credit, rising rents, access to capital.

Multifamily Cement Consumption Thousand Metric Tons

Residential Assessments Stronger labor markets & affordability. Foreclosures increase in  Inventory improvement is gradual, prices decline in Most troubled SF markets assumed at trough.  No drag on starts. Regional SF markets begin recovery in Multifamily sustained growth.  Household formation expands, troubled tenant credit, rising rents, access to capital. Improvements not a drag.  Nesters (45%), Rehab foreclosures (30%), Green (25%).

Total Housing Starts Thousand Starts ,1631,4021,

Residential Cement Consumption Thousand Metric Tons

Generation of Pent-Up Demand Thousand Starts Add: Higher demolition rate due to unfit foreclosed properties

Nonresidential Drag

Nonresidential Cement Outlook Thousand Metric Tons Annual Increase

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 Conditions for positive ROI Improving.

Public Recovery

Highway & Street Assessments No increase in nominal spending for federal highway program through  Upside risks. Highway program expired in Implies at least a 7 year impasse. ARRA dollars exhausted by mid  States swapped committed state highway spending with ARRA funds. Near-term state highway spending based on minimum maintenance levels. Pent-up state demand released beginning in fiscal Competitive price position improves throughout forecast horizon.  No change in states’ selection policies.

Discretionary State Cement Consumption Thousand Metric Tons

Highway Construction as Percent of Total Budget Real highway/Real State Expenditures Conservative Given Likelihood of Pent-Up Demand Release

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

Roadway Cement Consumption Outlook Thousand Metric Tons SAFETEA-LU/ Highway Bill State & Local

Portland Cement Consumption Thousand Metric Tons

The Recovery:

Introduction: Overview:  Structural Imbalances created during last boom diminish  Banks ease lending standards  Sovereign debt crisis softens  Foreclosures dramatically decline  State deficits replaced by surpluses Economic environment characterized by: Higher interest rates, higher taxes, higher inflation & slower economic growth Construction environment characterized by release of pent-up demand. Concrete competitive environment characterized by: NESHAP costs Improved competitive price advantages versus other building materials.

Capacity & Import Outlook 50% Planned Expansions, Wet Shutdowns, 75% Temporary Re-Open, NESHAP, Intensity Gains Re-Openings: Late

Cement Outlook Ed Sullivan, Chief Economist PCA PCA Spring Meeting April 2012