1. U.S. Construction & Cement Outlook Construction & Building Materials Conference Societe Generale, Paris March 9, 2007 David E. Czechowski Manager, Sr. Economist Economic Research Portland Cement Association

2. Key Points of Analysis The Economy Construction Spending Cement Industry Outlook Residential Nonresidential Public Demand & Supply

3. U.S. Economic Outlook

4. Key Near Term Issues  Job Growth  Length & Magnitude of Housing Decline  Hard or Soft landing – Timing of Recovery  Risk - Mortgage Resets Impact on Consumer  Oil Prices  International Demand/Disruptions/OPEC  Cement Import Volumes  Some Retightening of Market Balances  Inventory Draw

5. (Change from prior month) Nonfarm Employment Job Growth 2005: +2.03 Million 2006: +1.91 Million 2007: +1.60 Million -400 -200 0 200 400 600 Thousands 0001020304050607

6. Consumer Confidence 40 70 100 130 160 Index 1985=100 0001020304050607

7. Consumer Under Pressure Confidence Relatively Good But…. Pay Increase Averages 3.5%. Pay Increase Averages 3.5%.  Health Insurance Premiums Rise 7%-11%.  Property Taxes Rise.  Reassessments based on home appreciation Energy Prices Continue to Take a Bite Energy Prices Continue to Take a Bite Record Consumer Debt Record Consumer Debt Less Willing to Tap into Home Equity Less Willing to Tap into Home Equity Slowdown in Job Creation Slowdown in Job Creation

8. Real Investment Nonresidential Structures & Equipment -20 -10 0 10 20 30 40 Qtr/Qtr % Change 909294969800020406

9. Real GDP Growth -2 0 2 4 6 8 10 Qtr-Qtr % Change I 05 IIIIIIVI 06 IIIIIIVI 07 IIIIIIVI 08 IIIIIIV 3.2%3.3%2.6%2.4% DOWNSIDE RISK

10. U.S. Construction Markets “The real threat to economic growth is not the decline in housing but the way we financed the past boom and its impact on consumer spending”

11. Changing Composition of Construction Spending Growth Leader: Residential Growth Leader: Residential Low Interest Rates Low Interest Rates Public Public State Tax Revenues Hurt by Anemic Economic Growth State Tax Revenues Hurt by Anemic Economic Growth Growth Laggard: Nonresidential Growth Laggard: Nonresidential Weak Economy Weak Economy Growth Leader : Nonresidential Steady Economy Public State Tax Revenues Recovery Due to Economic Growth Growth Laggard : Residential Correction Lags Affordability Improves slowly Credit Tightening 2001-2005 2006-2010 Low Interest Rates Weak Economy Rising Interest Rates Steady Economy

12. Starts Activity More Than Low Rates… The Cyclical Upside: 2001 - 2005 Low mortgage rates – Lean Inventories Low mortgage rates – Lean Inventories Emergence of exotic mortgages Emergence of exotic mortgages Easy credit conditions Easy credit conditions Speculators add froth to the market Speculators add froth to the market The Cyclical Downside: 2006 - 2009 Mortgage rates rising Mortgage rates rising Inventory Draw Inventory Draw Exotic mortgages losing favor Exotic mortgages losing favor Defaults/delinquencies deteriorate credit quality and tighten credit conditions Defaults/delinquencies deteriorate credit quality and tighten credit conditions Speculators fade in lower appreciation rate environment Speculators fade in lower appreciation rate environment

13. Sub-Prime Mortgage Resets Total Loans Scheduled for Reset 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 200020012002200320042005200620072008 Period of Emerging Trouble

14. Inventory Draw Required Homes on Market/Monthly Selling Rate Ten Year Average Inventory Build Required Inventory Draw Required Highest Level Since 1997 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2000200120022003200420052006 10 Years of Inventory Build Conditions Disappear

15. Annual Growth Rate, Median Home Price Improves Affordability: Stronger 2009/2010 Outlook Speculators Leave 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 200120022003200420052006 Home Prices Will Play a Role in Correction

16. 0.5 1.0 1.5 2.0 Million Units 989900010203040506070809 Single Family Starts Year 2005 1.72 2006 1.48 2007 1.21 20081.30 Relatively Low Mortgage Rates, Home Price Correction, Builder Incentives

17. Nonresidential Construction Turning Points Achieved Turning Points Achieved Despite large percentage gains for 2006, most markets weak from historical perspective Despite large percentage gains for 2006, most markets weak from historical perspective Slower growth outlook depresses expected ROI and tempers recovery Slower growth outlook depresses expected ROI and tempers recovery High material costs add downside pressure High material costs add downside pressure Aids Cement intensity gains Aids Cement intensity gains 100 130 160 190 220 Billions 1996$ 95979901030506070809 Year 2005 3% 2006 12% 2007 8% 20084%

18. Nonresidential Investment Trends

19. Nonresidential Construction 200420052006 2007 2008 Industrial2%23%16%12%8% Office2%4%9%9%5% Lodging11% 1%46%11%5% Health Care-5%2% 20%5%1% Religious-12%-10%0%4%6% Educational-13%-5%3%2%4% Retail1%2%7%6%2%

20. Public Construction 120 140 160 180 200 220 Billions 1996$ 939597990103050709 Year 2005 0.0% 2006 5.7% 2007 3.7% 2008 3.9% Improving State Fiscal Picture Improving State Fiscal Picture Release of Pent-Up, Postponed Projects Release of Pent-Up, Postponed Projects Infusion of SAFETEA ($286Billion) Infusion of SAFETEA ($286Billion)

21. Public Construction 93% of public construction performed at state/local level 93% of public construction performed at state/local level Surpluses will re-emerge Surpluses will re-emerge State/Local fiscal problems fading State/Local fiscal problems fading Revenue growth improves with economy and job growth Revenue growth improves with economy and job growth Highway Bill adds strength Highway Bill adds strength -80 -40 0 40 80 $Billion 899193959799010305 07 State & Local Government Surplus

22. MA RI NH State Deficit Estimates FY 2005 0-9%20-29% 30-39% Pacific Mountain West North Central East North Central South Atlantic East South Central District of Columbia West South Central New England Middle Atlantic 10-19% Deficit as percentage of budget $0 $.3 $1.1 $.17 $15 $0 $2 $.5 $.34 $.71 $.19 $.0 $.6 $.62 $.17 $.9 $0 $5.1 $5 $.14 $0 $1.5 $.19 $.74 NJ $.2CT MD $.93 $.8 Secondary Source: National Association of Budget Officers Dollar figures, in billions, indicate amount states had to save to balance 2005 budget. KEY No available data DE$0 $.9 $0 $.6 $.2 $.9 $0 $.21 $0 $.3 $0 $.5 $0 VT$0 $.12 $0 Primary Source: Center on Budget Policy and Priorities Feb / 04

23. Public Investment Trends

24. Public Construction 200420052006 2007 2008 Buildings-4% -2%3%3%4% Highway-5%2% 10%6%5% Sewer-4%2%12%4%5% Water-10%0%6%4%4%

25. U.S. Construction Outlook 500 600 700 800 900 Billions 1996$ 9395979901030506070809 Year 2005 4.3% 2006 0.5% 2007 -1.8% 2008 1.2% 2009 2.9%

26. Construction Conclusions Residential Soft Landing Residential Soft Landing Mortgage Rate Increases Subdued Mortgage Rate Increases Subdued Affordability Improves Affordability Improves Nonresidential Recovery Underway Nonresidential Recovery Underway Turning Points Already Achieved Turning Points Already Achieved Recovery within Sectors Differ Recovery within Sectors Differ Still Weak from a Historical Perspective Still Weak from a Historical Perspective Public Spending Potential Strong Public Spending Potential Strong State Fiscal Recovery State Fiscal Recovery Pent-up Demand Pent-up Demand SAFETEA SAFETEA

27. U.S. Cement Demand

28. Portland Cement Consumption -20 -10 0 10 20 30 Year-Year % Change 020304050607 Harsh Winter Mild Winter

29. Cement Intensity Increases Favorable Relative Price Conditions Favorable Relative Price Conditions Concrete prices relative to steel/asphalt Concrete prices relative to steel/asphalt Material substitution in design Material substitution in design Cyclical Recovery Cyclical Recovery Larger, more cement intensive projects typically associated with economic recovery Larger, more cement intensive projects typically associated with economic recovery Construction Mix Construction Mix Outlook favors nonresidential and public construction with typically higher cement intensity Outlook favors nonresidential and public construction with typically higher cement intensity Code Changes/Green Building Code Changes/Green Building Fiscal Healing in Public Sector Fiscal Healing in Public Sector

30. Portland Cement Consumption 60 70 80 90 100 110 120 130 140 Million Metric Tons 8991939597990103050709 Year 2005 5.6% 2006 0.3% 2007 0.3% 2008 2.9%

31. U.S. Cement Supply

32. Residential Exposure Residential Cement Consumption as % of Total State Cement Consumption 1DELAWARE68.0% 2MAINE67.7% 3FLORIDA64.0% 4NEW HAMPSHIRE63.3% 5IDAHO46.6% 6NORTH CAROLINA46.0% 7VERMONT45.9% 8NEW JERSEY45.8% 9N. CALIFORNIA45.3% 10HAWAII44.7% NATIONAL37.8%

33. No ShortageTight Supplies Cement Supply - Summer 2005 Spot Tight Supplies

34. No ShortageTight Supplies Cement Supply - Summer 2006 Spot Tight Supplies

35. Competitive Materials Indexes

36. Blended Cement Consumption 1.0 1.5 2.0 2.5 3.0 3.5 Million Metric Tons 989900010203040506

37. Cement Inventories 2 4 6 8 10 Million Metric Tons 949698000204 Source: U.S.G.S. 05

38. 15 25 35 45 $/Ton Asia-Gulf 10 20 30 40 50 60 010203040506 Imports Freight Rates Metric Tons SAAR Market Tightening

39. Import Mix Shifting 5.3%Mexico 20.9%Latin America 19.7%Europe 21.1%Canada 29.5%Asia 2004 3.6%Other 6.5% 17.4% 18.5% 16.0% 36.0% 2005 5.5% 6.3% 11.1% 13.0% 13.1% 55.3% 2006 1.2%

40. U.S. Cement & Clinker Imports (Percent Change) November 2006 YTD Great Lakes South Atlantic District of Columbia New England Middle Atlantic -19 % 9%9% 1%1% 19 % 17 % 15 % - 11 % - 38 % Florida California Northwest Canadian Border Gulf Coast Mexican Border 5%5% U.S. 8 % 3%

41. Cement and Clinker Imports 0 10 20 30 40 50 Million Metric Tons 8991939597990103050709 Year 2005 33.6 2006 35.9 2007 34.5 2008 32.1 06

42. Announced Capacity Increases (Million Metric Tons) 0 1 2 3 4 5 6 7 8 9698000204050607080910 Net Expansion 2006-2010 22.5 MMT $5.0 Billion

43. Outlook Summary Slowing Economic Growth Slowing Economic Growth Labor Markets – Consumer – Investment Labor Markets – Consumer – Investment Construction Market Flattening Construction Market Flattening Residential Begins Recovery Moving Toward 2008 Residential Begins Recovery Moving Toward 2008 Continued Upside Contribution from Nonresidential & Public Continued Upside Contribution from Nonresidential & Public Cement Cement Demand Flat This Year Demand Flat This Year Utilization on Par with 2006 (94%) Utilization on Par with 2006 (94%) Inventories Return to Average (19 Days Supply) Inventories Return to Average (19 Days Supply) Imports Retightening Imports Retightening Significant Domestic Expansion 2008-2010 Significant Domestic Expansion 2008-2010

44. U.S. Construction & Cement Outlook Construction & Building Materials Conference March 9, 2007 David E. Czechowski Manager, Sr. Economist Economic Research Portland Cement Association Merci