1. Portland Cement Association United States’ Cement Outlook
Ed Sullivan, SVP Chief Economist
November I Breakers Hotel, Palm Beach Florida

2. Pre-Election Economic Fundamental 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

3. Underlying Economic Fundamentals Are Sound
Labor Market is solid. Unemployment is below 5%. Wages are starting to increase.
While inflation is increasing, its growth is sluggish, remains low and below the Federal Reserve’s target inflation rate (2%).
Interest rates are extremely low by historical standards and are growing slowly.
Home prices and consumer wealth are increasing.
Household debt to income ratio is lowest in history.
While we continue to record deficits, GDP growth has kept debt burden low.

4. Net Job Creation Monthly Gain

5. Unemployment Rate U3 Measurement

6. Inflation CPIU, Annual % Change

7. Interest Rates Annual %
BAA Bond Rate
Conventional Mortgage Rate

8. a
Election Impact on Economic Growth Momentum: Uncertainty & Expectations
Presentation
Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

9. Economic Performance Post Election: Confidence

10. Economic Performance Post Election: Real GDP

11. a

12. a

13. Election Impact on Momentum
Uncertainty increases and results in higher lending risk premiums, delays in investment spending, and a pause in consumer spending.
Economic growth slows by 50 basis points during the 4th Quarter 2016 and 100 basis points during the 1st Quarter 2017 followed by 50 basis points in the 2nd Quarter.
Growth in construction activity reduced by as much as 50% in each quarter compared to the baseline forecast.

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

15. Legislative Assumptions Leads to Three Scenarios:
Republicans Take House/Senate
(Need 60 Senate, Progress Faster)
Post-Election
Leads to Three Scenarios:
1). Trump program proceeds at Face Value.
2.) Trump program is accented by compromise (Lite).
3.) Congress resists and Impasse materializes. =

16. Trump Policies That Impact Economic Growth
Most Likely
Least Likely
Infrastructure Investment (L)
Reduce Regulations (EO)
Obamacare Revision (L)
Tax Reform (L)
Immigration Reform (EO)
Illegal Immigration (L)
Building the Wall (L)
Trade Reform (L)

17. Trump Policies That Impact Economic Growth
Most Likely
Least Likely
Infrastructure Investment (L)
Reduce Regulations (EO)
Obamacare Revision (L)
Tax Reform (L)
Immigration Reform (EO)
Illegal Immigration (L)
Building the Wall (L)
Trade Reform (L)

18. Timing: Economic Scenario
2017
No legislative policy initiatives.
Executive orders (EO) occur on regulations & immigration.
2018
Infrastructure program initiated.
Regulation & Immigration EO continue.
2019
Tax Reform program initiated.
Infrastructure continues.

19. Trump Infrastructure Initiatives (2018)
Presentation
Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

20. Infrastructure Timing: Nothing Soon
One Month
Six Months
One Year
Eighteen Months
House & Senate Passage
1-9 Months
Federal & State Paperwork
4-12 Months
Bid Letting & Review
6-15 Months
Contract Award to Construction
Months
Average Construction Start: 15 Months or Mid-2018

21. Infrastructure Size of Program
Billion $, Stated As Five Year Spending
Face Value : $100 billion annually (mid-2018).
Trump Lite: $46 billion annually (Clinton mid-2018).
Impasse: No significant increase.. =

22. Trump Infrastructure Policy
Level and specifics of Trump infrastructure spending are cloudy. As such, creating impact estimates for cement consumption becomes problematic.
Sanders Senate Bill (S.268) specifically identifies investments in various infrastructure areas based on a $1 trillion five year program.
PCA scenarios suggests:
Face value: $1 trillion ten year program or $500 billion five year program.
Trump Lite: $275 billion five year program (Clinton).
Impasse: No significant increase.
Assume Trump Infrastructure Plan differs from S.268 only in funding not distribution. As such, PCA uses S.268 as a proxy for the Trump plan.
This yields estimates for specific dollar spending amounts that can be applied for Trump Spending proxies and then later converted into cement consumption estimates.

23. a
Broadband
Pedestrian
Electric Grid
Trump “Face Value” Infrastructure Scenario: $ $100 Million Annually, 5 Year Package
Harbor, Dams & Levees
Safe Water
Rail
Airports
Public Transit

24. Trump Infrastructure :Time Distribution
Calendar Year Conversions
2018: $10.5 Billion
2019: $42.5 Billion
2020: $75.0 Billion
2021: $93 Billion
Based on ARRA spending & DOT

25. S&L Sterilization Changes in Spending, Mil $
88%
State & Local Sterilization Assumption
20%

26. Trump Infrastructure Scenario: Cement Distribution of Gains
Safe Water
Harbor, Dams & Levees
Electric Grid
Rail
Trump Infrastructure Scenario: Cement Distribution of Gains
Airports
Public Transit

27. Cement Consumption Infrastructure Scenarios
Shorten Spending Horizon to 2 Years and No Sterilization…
Trump Face Value totals 38 MMT

28. Average Concentration Highest Concentration
Deficient Roads
Lane miles rated ‘poor’ as a share of total lane miles 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 WV VA NC MD DE PA NY CT NJ KY
Average Concentration
Lowest Concentration
Source: PCA
Highest Concentration

29. Highest Concentration Average Concentration
Deficient Bridges
Structurally deficient and functionally obsolete share of national total 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 WV VA NC MD DE PA NY CT NJ KY
Highest Concentration
Average Concentration
Lowest Concentration
Source: PCA

30. Regional Funding Allocations
Estimated allocation of funding based on stock of deficient roads & bridges 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 WV VA NC MD DE PA NY CT NJ KY
Top Third
Middle Third
Bottom Third
Source: PCA

31. Trump Tax Reform Initiatives
Presentation
Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

32. Trump Tax Policies Tax Reductions Ten Year Revenue Loss
Individual (77%)
Corporate (20%)
Estate (3%)
Increases GDP
Adds Net New Jobs
Ten Year Revenue Loss
Citizen Justice (-$12 Trillion)
Tax Foundation (-$12 Trillion)
Tax Policy Center (-$9.5 Trillion)

33. Tax Policy: RGDP Growth Billion $
Reaction to tax cut takes time to incubate.
Stimulus adds 20 BP to growth initially in Q1 2019, and increases to 110 BP by Q4 of 2021.

34. Tax Policy: RGDP Growth Billion $
Tax Reform Avg. Annual RGDP Growth
Face Value: 2.8%
Impasse
Tax Reform Avg. Annual RGDP Growth 2.3%
Trump Lite
Avg. Annual RGDP Growth
2.6%

35. Cement Consumption Tax Scenarios
Stimulatory Impact of Tax Reform is sensitive to the degree of relief, its target & the form.
Tax multipliers range from 0.3 to 5.
Estimates represent risk.

36. Tax Policy: Revenue Shortfall Trump Face Value, Billion $
Direct Tax Shortfall
Shortfall After Economic Expansion

37. Tax Policy: Cumulative Debt Billion $
Assumes Infrastructure is Deficit Neutral. It will likely imply a deficit – added atop these estimates.
Add Military Spending. Add Wall.

38. Tax Policy: Interest Payments Billion $
Interest payments on debt already account for $231 billion or 6.1% of total Federal spending.
Tax Reform alone increases interest payments by 70% over current levels.

39. a
Tax Reform Impact
Assume that Tax Reform is embraced by Republicans and enacted January 1, 2019.
Stimulates RGDP growth by 50 basis points in 2019 and 110 basis points in 2020 and beyond.
Adds 300K metric tons to baseline in 2019, 900K metric tons in 2020, 2.1 million tons in 2021, and 3.4 million metric tons in 2022.
Added economic growth, on an already stressed labor market drives unemployment down. Wages rise at an accelerated pace.
Higher wages lead to higher inflation and a harsh reaction by the Federal Reserve. Adverse interest rate impacts assessed later.

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

41. Trump Immigration Policies
More Likely
Least Likely
Mass Deportations
Building the Wall
Immigration Pause (EO)
E-Verify & Employment Policies (EO)
Hiring Customs Officers (EO)
Penalizing Sanctuary Cities (EO)

42. a
Immigration Scenario
Based on Center for Immigration Studies, past peak deportations were roughly 400,000 and 5,000 customs agents were deployed.
That translates into 80 annual deportations per agent.
Trump hires 10,000 additional agents. At 80 deportations per agent, that implies a potential of 1.2 million deportations.
46% of deportees return within one year. That leaves a net decline of roughly 650,000 annually.
This is supplemented with voluntary departures of roughly 500,000 annually. 60% of which return in one year.
That leaves a net total decline in illegal immigrants of 850,000 annually.

43. Labor Force Estimate Policy Only, No Reaction
Trump Lite Value: 2021 – 1.7 million
Trump Face Value: 2021 – 3.3 million =

44. Market & Policy Response
Presentation
Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

45. Unemployment Rates U3 Measurement, No Reaction
Impasse/Baseline

46. Construction Skill Shortage May Be Worsening
To Maintain 1 to 1 Ratio an additional 200K workers hired in 2015 & 300K in 2016.
This implies the skill shortage is worsening

47. Hardest Construction Positions to Fill

48. Unemployment Rates U3 Measurement, No Reaction
Impasse/Baseline
Uncertainty & Infrastructure

49. Unemployment Rates U3 Measurement, No Reaction
Impasse/Baseline
Uncertainty & Infrastructure
Uncertainty, Infrastructure & Tax Reform

50. Unemployment Rates U3 Measurement, Policy Only No Reaction
Impasse/Baseline
Uncertainty & Infrastructure
Uncertainty, Infrastructure & Tax Reform
Uncertainty, Infrastructure, Tax Reform & Immigration Reform

51. a
Marketplace Reaction
Financial markets react first as inflation expectations get baked into long interest rates. The yield curve steepens.
Risk premiums on loans begin to edge up.
Pressure on wages increases as unemployment is pushed lower.
Nonlinear relationship. Wages increase faster given a 100 basis point decline in unemployment when rates are at 4%, than when they are at 5%.

52. Marketplace Reaction With wage increases, labor force expands.
Business invests in labor saving machinery – results in a tripling in labor productivity by 2021 (If not, wages rise further).
This investment will occur during a period of monetary policy tightening (high and rising interest rates).
Some jobs are foregone to detriment of GDP growth.

53. Wage Growth Scenarios Annual % Change, Employment Cost

54. Inflation Scenarios Annual % Change, CPIU

55. Interest Rate Scenarios Annual % Change, Federal Funds

56. GDP Growth Scenarios Annual % Change, Real GDP

57. Cement Consumption Scenarios Annual % Change
8.3%
6.0%
4.4%
4.0%
3.5%
3.6%
3.5%
1.5%
3.1%
2.8%
0.1%
3.6%
-0.6%
-5.3%

58. Portland Cement Association United States’ Cement Outlook
Ed Sullivan, SVP Chief Economist
November I Breakers Hotel, Palm Beach Florida

59. Build the Wall 1,000 miles. Height: 35’-40’. Width: 6’-10’.
Cost Range: $17.1 Billion to $29.6 Billion.
Five years to Complete.
Cement Consumption: Total: 7.0 MMT to 12.7 MMT. Per Annum: 1.2 MMT to 2.5 MMT

60. At 90% Utilization: US Supply Potential Approximates 145 MMT.
US Supply 000 Metric Tons
Supplementary Cementitious Materials
Import Cement Capacity
Import Clinker Capacity
Domestic Clinker Capacity
At 90% Utilization: US Supply Potential Approximates 145 MMT.