1. Cement & Construction Outlook
RMCAO 49th Annual AGM & Convention
September 12th, 2008
David Czechowski
Sr. Canadian Economist
Portland Cement Association
The U.S. is in the hospital. Canada is sick but still showing up for work

2. U.S. Snapshot

3. States in Recession As of May, 2008 Recession At Risk Growing ME RI MAVT 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 AK HI
Recession
At Risk
Growing

4. Foreclosures are concentrated…
Below U.S.
US: 2%
Near U.S.
Above U.S.
% of households defaulting on their 1st mortgage, 08Q1
Source: Equifax, Economy.com

5. Construction Declines May Not Be Short or Shallow!
2006
Foreign Capital Inflows
2007
Housing
2008
Consumer
2009
Commercial
Public
Energy

6. The U.S. Prognosis Near Term Adversity Economic outlook remains dim
May continue longer than expected
No recovery in housing until 2010
Nonresidential may require longer recovery
Potential for fiscal crisis at state level

7. U.S. Cement Consumption Outlook
Double-digit decline in consumption this year
Peak (2005) to Trough (2009) = 30 MMT (% decline equals Recession)
Large capacity increases magnify potential market imbalances
Imports record large, sustained declines (- 40% ’07)
Global conditions suggest high freight rates continue
2008 bearing burden of correction (-46% YTD)
Utilization Rates decline
Materializes to a greater extent in 2009
Past peak (2005) not realized until 2014

8. National

9. On the Radar… Employment Slower Growth materializing Oil Prices
Expected to remain high
Dollar
Hampering External Market Recovery
Inflation
Bank of Canada’s focus
Consumer Debt
Pressure is building
Prolonged U.S. Recession
Too many shots on goal!

10. Employment Canada U.S. 3.0 2.0 1.0 0.0 -1.0 04 05 06 07 08 Forecast% % % %
Year-Year
% Change
3.0
Canada
2.0
1.0
U.S.
Housing Market Collapse
Foreclosures accelerating
Credit Risk Aversion now Spreading
Labor Markets in Decline
Outlook not favorable
Consumer Confidence Tumbling
Consumer debt loads signaling a retrenchment
Energy Costs
Stealing from growth and stimulus
Fiscal/Monetary Actions
Long to develop
Q1: 2.0%
0.0
-1.0 04 05 06 07 08

11. Is This a Turning Point? In U.S. $ $/BBL Forecast 2007 .931 2008 .987
140
Dollar (R)
1.05
100
0.95
Forecast
West Texas (L) 60
0.85 20
0.75 05 06 07 08 09

12. Consumer Credit Outstanding
Duration (Months)
Growth in Excess of 8%
Year-Year
% Change 16 19 63 21 12 8 4
3MMA 90 92 94 96 98 00 02 04 06 08

13. Real Growth
Month-Month
% Change
0.8
0.4
0.0
-0.4
-0.8 06 07 08

14. Economic Outlook Real GDP Growth: 1.8% - 2.4% 2007 2008- 2009
2.3%
Slower Growth
Marginal Improvement
Employment
Dollar
.931
Stubbornly High
Softening Begins
Supportive but
Slowing
4.7%
Slowdown Continues
Consumer
Spending
Housing Starts
0.4%
Slow Growth
All Provinces
Weaken
Real GDP Growth: 1.8% - 2.4%

15. Risks Prolonged or Deeper U.S. Recession Canadian Consumer Retrenches
Ultimately Canada could would succumb
Canadian Consumer Retrenches
Debt levels become unmanageable
Commodity Price Collapse
Global financial and economic meltdown pressures commodity prices and drags on growth
Nearly 5 years of +8% consumer debt outstanding
Mortgage debt +92% since 2000

16. Construction Markets

17. Cement Markets Exposure
(Five Year Average)
Construction Spending
Cement Consumption
Residential: 47%
Nonresidential: 19%
Industrial: 3%
Commercial: 9%
Institutional: 7%
Engineering: 33%
Transportation: 6%
Other: 28%
Residential: 35%
Nonresidential: 29%
Industrial: 7%
Commercial: 16%
Institutional: 5%
Engineering: 33%
Transportation: 20%
Other: 13%
(Oil/Gas/Electric/Communications/Other)

18. Residential Sector Forecast 2008 - 4.9% 2009 - 2.2% 2010 0.8%
Units
300
Forecast % % % %
270
240
210
180 05 06 07 08

19. Nonresidential Permits
Billions $ 28 22 16
3MMA - SAAR 10 01 02 03 04 05 06 07 08

20. Nonresidential Sector
Office vacancy rates down in all top 5 metros

21. On The Radar… Residential Singles weakening
Multiples surprise on the upside
Affordability and consumer stress
Outlook weak
Central Provinces in search of a trough
Western Provinces showing some fatigue
Nonresidential
Commercial/Industrial/Institutional remain supportive
Engineering
Infrastructure requirements and funding plentiful
Provinces need to pull the funding trigger

22. Real Construction Spending
Forecast % % % % %
Index
1999=1.0
2.0
Engineering
1.7
Residential
1.4
Nonresidential
1.1
0.8 99 00 01 02 03 04 05 06 07 08 09 10 11

23. Cement Markets

24. Cement Imports 1200 900 600 300 99 00 01 02 03 04 05 06 07 08 Clinker
000 MT
1200
Clinker
Cement
900
YTD May
+ 7%
600
300 99 00 01 02 03 04 05 06 07 08

25. Cement Exports 8.0 6.0 4.0 2.0 90 92 94 96 98 00 02 04 06 07 Forecast% % % %
Million
Tonnes
8.0
Clinker
Cement
6.0
+ 10%
4.0
YTD June
- 20%
Weak demand dragging on export flows
2.0 90 92 94 96 98 00 02 04 06 07

26. Canadian Share of U.S. Imports
2004
2005
2006
2007
Asia
29.5%
36.0%
53.9%
48.3%
21.1%
16.1%
14.1%
Canada
23.4%
58.0%
61.9%
61.1%
55.9%
Ontario
Europe
19.7%
18.5%
13.0%
8.3%
Point: Ontario’s share to the U.S. remains strong but weakened due to slower demand.
Latin America
20.9%
17.4%
11.4%
11.8%
Mexico
5.3%
6.5%
6.3%
7.5%
Other
3.6%
5.5%
1.3%
0.7%

27. Ontario Cement Trade
Forecast % %
000
Tonnes
Million
Tonnes
550
3.4
3.3
450
3.2
Imports (L)
3.1
350
Exports (R)
3.0
Point: 04/05 export volumes exceptional in wake of strong U.S. demand. 06/07 more in line with longer term trends.
Point: Outlook: Flat/slow growth next several years
U.S. demand continues to weaken in competitive environment
2.9
250
2.8
150
2.7 97 98 99 00 01 02 03 04 05 06 07 08
Export Customers Include:
Bermuda/China/Japan/Jamaica/UAE
Import Sources Include: China/U.K/Denmark/Croatia/Germany

28. Cement Capacity Utilization
New Capacity
Lafarge, Exshaw, AB
+900,000 On Stream: 2010
Percent 95 90 85 80 75 97 98 99 00 01 02 03 04 05 06 07
Source: PCA Labor/Energy Input Survey

29. SCM Consumption
Million
Tonnes
+ 10.3%
1.5
YTD
+ 22%
1.4
1.3
1. 0
Jan +19% Feb +28%
1.1
1.0
0.9 00 01 02 03 04 05 06 07

30. Competitive Materials
(Index 2002=100)

31. Cement Outlook

32. Cement Consumption
Million ?
Tonnes 12 10 ? 8
42% drop in recession. Would return CA to a 5.6 mmt market? 6 4 69 73 77 81 85 89 93 97 01 05 08
Canadian Recession
U.S. Recession

33. Portland Cement Consumption
Year-Year
% Change 40
1st Half
-0.4% 30 20 10
-10
-20 04 05 06 07 08
5.0%
1.2%
1.7%
2.9%

34. Portland Cement Consumption
Forecast % % % %
Million
Tonnes
11.0
10.0
+ 2.9%
9.0
Downside
Risk
$: 47/20/33
Cement: 35/30/33
8.0
7.0 99 00 01 02 03 04 05 06 07 08 09 10 11
Remember this Phrase
N'oubliez pas cette phrase

35. Provincial Snapshot

36. Weaker Economic Growth Expected
2007
2008
2009
3.1%
Atlantics
1.6%
2.0%
Quebec
2.6%
1.5%
2.0%
Ontario
2.1%
1.0%
1.5%
Prairies
3.0%
3.2%
3.1%
British Columbia
2.8%
2.3%
2.7%

37. Portland Cement Consumption
Index
2000=1.0
2.0
British Columbia
1.8 9%
1.6
Prairies
1.4 4%
Atlantics
Performance Indicators Will Slow
Employment Growth Advances at a Slower Pace
Stubborn C$ funding consumer spending but will drag on trade
Debt levels may slow consumer
Residential Construction Markets Weak this Year and Next
Fatigue in both Singles and Multiples
Nonresidential Construction Maintains Rise
Supportive but at a slower pace
Engineering Construction Opportunity in Place
Requirements plentiful with adequate funding available
1.2 4%
Quebec 4%
Ontario
1.0
- 1%
0.8 00 01 02 03 04 05 06 07 08 09 10 11

38. Provincial Assessment
Performance Indicators Slowing
Employment Growth Slows
Stubborn C$ funding spending but dragging on trade
Debt burden may slow the consumer
Residential Construction Markets Weak
Central provinces in search of a trough
Western provinces showing fatigue
Nonresidential Construction Supports Spending
Industrial/Commercial sectors continue to support
Engineering Construction Opportunity in Place
Requirements plentiful with adequate funding available

39. Ontario Spotlight

40. Net Provincial Migration - Ontario
Thousands 60 20
-20
-60 00 01 02 03 04 05 06 07 08 09 10

41. Employment Growth - Ontario
Forecast % % % %
Thousands 70 50 30 10
-10
-30 05 06 07 08

42. Employment Growth - Ontario
Year-Year
% Change 15
Construction 10 5
Services -5
Manufacturing
-10 05 06 07 08

43. Residential Permits - Ontario

44. Housing Starts - Ontario
Forecast % % % %
Thousand
Units 50
Multiples 40 30
Singles
3MMA - Urban 20 03 04 05 06 07 08

45. Nonresidential Permits - Ontario

46. Nonresidential Permits - Ontario
Millions $
1200
1000
800
600
400 00 01 02 03 04 05 06 07 08

47. Ontario Construction Spending
Index
1999=100
1.6
Engineering
1.3
Residential
Nonresidential
1.0
Point: Assumes some level of government support but not reflective of today’s initiatives
0.7 99 00 01 02 03 04 05 06 07 08 09 10 11

48. Real Economic Growth - Ontario
Forecast % % % %
Year-Year
% Change 8 6 4 2 99 00 01 02 03 04 05 06 07 08 09 10 11

49. Provincial Summary - Ontario
Residential
Supported by multi-family – singles suffering
Nonresidential activity advancing but lagging and at risk
Key Industries under Pressure
No hope for automotive?
The Dollar helping little
Energy/Input commodities
Demographics not a growth supporter
Engineering sector growth adequate
$7.8$B (Building Canada – Ottawa)
Moderate growth forecast

50. Ontario Cement Market

51. Ontario Markets Exposure
(Five Year Average)
Construction Spending
Cement Consumption
Residential: 58%
Nonresidential: 23%
Industrial: 3%
Commercial: 11%
Institutional: 9%
Engineering: 17%
Transportation: 7%
Other: 12%
Residential: 41%
Nonresidential: 29%
Industrial: 7%
Commercial: 15%
Institutional: 6%
Engineering: 30%
Transportation: 17%
Other: 13%
Point: Construction Spending weighted toward residential however cement consumption spans each sector more evenly.
(Oil/Gas/Electric/Communications/Other)

52. Cement Distribution - Ontario
Percent 90
Ready Mix
Concrete Products 70 50 30 10 99 01 03 05 07
Source: Concrete Allocation Benchmark Model

53. Concrete Products - Ontario
Tonnes
Q1-2007
Q1-2008
Q2-2008
Brick & Block
14,333
29,521
37,023
Concrete Pipe
19,929
18,201
16,446
Precast
26,528
36,258
41,802
Source: PCA Survey of Cement Consumption by User Group

54. Residential Cement Intensity Ontario
Tonnes/Start
Singles
Multiples 20 18 16 14 12 99 00 01 02 03 04 05 06 07
Source: Concrete Allocation Benchmark Model

55. Ready Mix Penetration - Ontario
M3/000 f2 45
Residential
Nonresidential 40 30 25 15 99 01 03 05 07
Source: Concrete Allocation Benchmark Model

56. Ready Mix Price Index Year-Year % Change 10 Canada 5 Ontario June $176
June
$176
63% -5
$108
Index:3MMA Source: STC
Price: Toronto $/cm Source: ENR
-10 98 99 00 01 02 03 04 05 06 07 08

57. Competitive Opportunity - Ontario
Index
2001=1.0
3.0
Asphalt
2.5
2.0
1.5
1.0
Ready Mix Concrete
Source: OHMA,STC
0.5 01 02 03 04 05 06 07 08

58. RMC Cost of Business - Ontario
Year-Year
% Change 90
$1.43/liter
Diesel 60 30
Electricity
-30
-60 05 06 07 08

59. Ontario Cement Consumption
Year-Year
% Change 40 30 20
1st Half
- 0.6% 10
-10
-20 05 06 07 08
-2.4%
-2.0%
-1.2%

60. Ontario Cement Consumption
Million
Forecast % % % % %
Metric Tonnes
4.0
3.5
3.0
Point: Internal Demand: Housing slows
Slower Consumer Spending
Point: External Demand: U.S. Recession
Housing Slowdown
Risks on the Downside
Remember the Phrase!
2.5
2.0 00 01 02 03 04 05 06 07 08 09 10 11

61. 2007 Forecast Performance Accuracy* Atlantics 95.1% Quebec 97.2%
Ontario
99.4%
Prairies
98.6%
British Columbia
98.8%
* Average Spring/Summer/Fall Forecasts

62. Thank You