1. Cement Outlook: 2007 Annual Concrete Pavement Workshop January 2007 Salt Lake City, UT Steven Ko PCA Senior Regional Economist

2. Key Points of Analysis U.S. Economic Outlook Construction Outlook Cement Outlook Residential Nonresidential Public Demand Operating Conditions Residential Nonresidential Public Regional Perspective

3. Economic Outlook : Real GDP Growth 2004: 4.2% Real GDP Annual Growth Rate ----------2004-----------------2005--------------2006-------------2007------- 2005: 3.5% 2006: 3.1% 2007: 2.6%

4. Economic Growth Conclusions Consumption Growth Slows 2006-2007 Consumption Growth Slows 2006-2007 Interest Rates Gradually Rise Interest Rates Gradually Rise

5. Snap Shot of Economic Activity Consumption acts as the anchor for US economic activity. Any retrenchment in consumer spending will lead to slower economy-wide growth rates

6. Consumer Spending Consumer Spending Outlook Job & income growth Job & income growth Oil prices, inflation and interest rates Oil prices, inflation and interest rates Affordability erosion Affordability erosion Housing & refinancing

7. Oil Price Outlook $ Per Barrel, West Texas Intermediate Oil Prices are declining as projected Oil Prices are declining as projected Strong International Demand Strong International Demand Supply Disruptions Continue Supply Disruptions Continue OPEC Actions OPEC Actions 2006: $65.85 per barrel WTI 2007: $60.30 2006: $65.85 per barrel WTI 2007: $60.30

8. Federal Reserve Policy Actions Federal Funds Interest Rate, Annual Percentage Rate Overall Economy & Job Growth Slowing Overall Economy & Job Growth Slowing Inflation a growing concern Inflation a growing concern Dilemma: Inflation or Growth? Dilemma: Inflation or Growth? Do not count out further Fed Tightening Do not count out further Fed Tightening Risk of Fed over- reaction Risk of Fed over- reaction

9. Inflation Outlook Annual Percent Change, CPI Urban Higher Energy Prices Structure Higher Energy Prices Structure Labor Costs Rising Labor Costs Rising Structurally Weaker Dollar Structurally Weaker Dollar Structurally Higher Transportation Costs Structurally Higher Transportation Costs 2006: 3.4% 2007: 2.7% 2006: 3.4% 2007: 2.7% Supply Side Inflation Supply Side Inflation

10. Single Family Housing Starts (000) Units Growing Downside Risks

11. Inventory Draw Required Homes on Market/Monthly Selling Rate Ten Year Average Inventory Build Required Inventory Draw Required Highest Level Since 1997

12. Mortgage Rate History: 30 Year Conventional Annual Growth Rate, 30 Year Conventional Peak to Trough 294 Basis Point Decline Last 12 Months Reflect a 100 Basis Point Increase

13. Growing Home Price & Income Gap Annual Growth Rate Comparison Home Prices Household Income

14. Sub-Prime Mortgage Resets Total Loans Scheduled for Reset Period of Emerging Trouble

15. Single Family Permits - Utah # of units

16. Multi-Family Permits - Utah # of units

17. Residential Cement Consumption Utah Metric Tons

18. Affordability Index Most Affordable Pacific Mountain West North Central East North Central South Atlantic East South Central West South Central New England Middle Atlantic Affordability Ratio 2 nd Tier3 rd Tier4 th TierLeast Affordable

19. Economic Growth Conclusions Consumption Growth Slows 2006-2007 Consumption Growth Slows 2006-2007 Interest Rates Gradually Rise Interest Rates Gradually Rise Investment Sector Strength Continues Investment Sector Strength Continues

20. Investment Spending Nonresidential Fixed Investment, Annual Percent Change Near term outlook remains positive Near term outlook remains positive Fixed, Non-residential investment has recorded strong growth during last two years Fixed, Non-residential investment has recorded strong growth during last two years

21. Nonresidential Construction Annual Growth Rate +9.2% 2006 First Half 6.8% Projected 2006

22. Nonresidential Outlook Lodging Outlook Lodging Outlook Retail Outlook Retail Outlook Health Construction Outlook Health Construction Outlook Office Building Outlook Office Building Outlook Industrial Outlook Industrial Outlook

23. Labor Market Outlook Monthly Net Job Creation, Payroll Survey Job growth slowing Job growth slowing Unemployment rises Unemployment rises Slow down in trend of accelerating wages Slow down in trend of accelerating wages

24. Nonresidential Cement Consumption Utah Metric Tons

25. Economic Growth Conclusions Consumption Growth Slows 2006-2007 Consumption Growth Slows 2006-2007 Interest Rates Gradually Rise Interest Rates Gradually Rise Investment Sector Strength Continues Investment Sector Strength Continues Large Trade Deficit and Federal Deficit Act as Drag on Growth Large Trade Deficit and Federal Deficit Act as Drag on Growth Foundations for Growth remain Foundations for Growth remain

26. Public Construction Outlook: State & Local Share of Public Construction Percent of Total Public Construction Spending

27. Public Construction Outlook 93% of public construction performed at state/local level. 93% of public construction performed at state/local level. 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 2006: +4.8% 2007: +5.5% 2006: +4.8% 2007: +5.5% Note: 2005: +1.9% Note: 2005: +1.9% Billion $ State Surplus/Deficit, NIPA

28. MA RI NH 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 $.85 $.11 $1.0 $.16 $0 $.36 $.4$.98 $0 $1.5 $.05 $.38 $.3 $.12 $38 $3.7 $3.6 $.6 $.22 $.41 $1.0 $.09 $2.4 $0 $2.0 $.75 $.5 $.49 $1.3 $1.7 $.2 $2.4 $9.3 $2.0 $.74 $4.6 $.14 $.4 $.15 $3.0 $.17 $.85 $.2 NJ $1.9CT MD DE VT $.25 $1.1 $2.0 $.03 $.08 Primary Source: Newsweek July 28, 2003 Secondary Sources: Nat’l Conf. of State Leg., Center on Budget and Policy Priorities, Nat’l Assn. of State Budget Officers, Calif. Budget Project Dollar figures, in billions, indicate amount states had to save to balance 2004 budget. KEY Public Construction Outlook: State Deficit Estimates Fiscal Year 2004

29. MA RI NH Public Construction Outlook: State Deficit Estimates Fiscal Year 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

30. Public Cement Consumption Utah Metric Tons

31. Changing Composition of Construction Spending Growth Leader: Residential Growth Leader: Residential Public: Weak Tax Revenues Public: Weak Tax Revenues Growth Laggard: Nonresidential Growth Laggard: Nonresidential Growth Leader : Nonresidential Public: Tax Revenues Recover Growth Laggard : Residential 2001-2005 2006-2009 Low Interest Rates, Weak Economy Rising Interest Rates, Strong Economy

32. Growth Rate Yellow Line Volume, Green Bar Portland Cement Outlook Thousand Metric Tons Annual Percent Change

33. No ShortageTight Supplies Cement Supply Survey Summer 2006 Spot Tight Supplies

34. Market Balances: Trend Inventory Adjustment Adjusted Supply Vs Consumption Green: Domestic Yellow: Imports Green: Inventory Red: Day Supply

35. $5.0 Billion Committed to Expansion Thousand Metric Tons Clinker Cement Capacity Outlook

36. Domestic Supply Conclusions Tight market conditions dramatically reduced Tight market conditions dramatically reduced Characterized by high operating rates Characterized by high operating rates Persistently lean inventory position Persistently lean inventory position Major expansion does not materialize until 2008. Major expansion does not materialize until 2008.

37. Clinker Capacity (000 Metric Tons) 19972007 Arizona1,8002,809 Colorado1,7142,117 Idaho260260 Nevada630632 New Mexico432432 Utah1,0191,514 Wyoming584597 Region6,4398,361 +30% Regional ExpansionsMMTYear Eagle Materials – Laramie, WY.400‘08 Eagle Materials – Fernley, NV.500’08 GCC America – Pueblo, CO 1.000’08 Ash Grove – Moapa, NV 1.750’09 Cali Portland – Rillito, AZ 1.000 ’09

38. 20032004200520062007 Arizona3.614.124.674.614.71 %Change 10%14%13%-1%2% Colorado2.292.442.592.612.69 % Change -12%7% 6%1%3% Idaho0.590.690.710.710.70 %Change 4%16%3%1%-1% %Change 4%16%3%1%-1% Nevada2.032.382.602.652.70 %Change 10%18%9%2%2% %Change 10%18%9%2%2% New Mexico0.810.940.900.920.94 %Change -1%16%-4%3%1% %Change -1%16%-4%3%1% Utah1.201.371.541.601.66 %Change 3%14%12%4% 4% %Change 3%14%12%4% 4% Wyoming0.420.460.480.480.49 %Change 3%9%4%1% 2% %Change 3%9%4%1% 2%U.S. %Change 4%7%6%1% 1% Regional Portland Cement Consumption (Million Metric Tons)

39. Key Markets Exposure - Utah Cement Consumption as % of Total State Cement Consumption Residential: 27 % National: 35% Residential: 27 % National: 35% Nonresidential: 16% National: 18% Nonresidential: 16% National: 18% Public: 56% National: 47% Public: 56% National: 47% Highway: 34% National: 30% Highway: 34% National: 30% Cement per Capita U.S.:.41 Cement per Capita Utah:.64

40. Residential Spending: Regional 1Idaho39.5% United States35.2% 2New Mexico32.1% 3Arizona31.2% 4Colorado28.6% 5Utah27.4% 6Nevada26.7% 7Wyoming13.0% Cement Consumption as % of Total State Cement Consumption

41. Nonresidential Spending: Regional 1Wyoming38.7% 2Colorado27.6% 3New Mexico26.6% 4Idaho25.7% 5Nevada21.2% 6Arizona19.7% United States18.1% 7Utah16.3% Cement Consumption as % of Total State Cement Consumption

42. Public Spending : Regional 1Utah56.0% 2Nevada52.0% 3Arizona48.9% 4Wyoming48.2% United States47.0% 5Colorado43.7% 6New Mexico41.1% 7Idaho34.3% Cement Consumption as % of Total State Cement Consumption

43. Street & Highway Spending: Regional 1Wyoming38.5% 2Utah33.6% 3Nevada32.5% United States29.9% 4Arizona26.4% 5Idaho23.5% 6Colorado23.3% 7New Mexico23.3% Cement Consumption as % of Total State Cement Consumption

44. Cement Outlook - Utah Metric Tons Year 2005 12.2% 2006 3.6% 2007 4.1% 2008 0.1%

45. Conclusions Slower Economic Growth Ahead Slower Economic Growth Ahead Construction Market Flattening Construction Market Flattening Cement Supply Slow to Adjust to Slower Growth Environment Cement Supply Slow to Adjust to Slower Growth Environment Slower Growth in Cement Consumption Slower Growth in Cement Consumption

46. Cement Outlook: 2007 Annual Concrete Pavement Workshop January 2007 Salt Lake City, UT Steven Ko PCA Senior Regional Economist