1. Cement Outlook: 2010-2015 Ed Sullivan, Chief Economist PCA PCA Fall Meetings September 2010 Named Most Accurate Forecaster By Chicago Federal Reserve, 2009

2. Overview

3. Portland Cement Consumption Thousand Metric Tons - 54 MMT Growth Rates 2007: - 9.6 2008: - 15.1 2009: - 26.9 2010: + 2.6 2011: + 6.7 2012: + 8.1 2013: + 14.3 2014: + 5.9

4. Ingredients for a “Recovery” Residential Public Late 2010 Recovery in Starts. ARRA continues to accelerate. Cement projects materialize 2 nd half 2010 Cement Consumption: + 2.6% 2010 This Implies continued weak consumption levels during first half of 2010 PCA’s growth in 2010 translates into 1.7 MMT. This “recovery” must be considered in the context of a 54 MMT peak-trough decline.

5. Portland Cement Consumption SAAR, Thousand Metric Tons 2008 2010

6. Portland Cement Consumption SAAR, Thousand Metric Tons 2010

7. Tepid Expected National Gains – Vary Significantly by Region/State

8. National versus Regional Outlook States with: High foreclosure exposure will not fully participate in the modest housing recovery. High ARRA resurfacing priorities will see less stimulatory impact. Little exposure to oil or farm sectors will bare brunt of nonresidential declines.

9. Cement recovery will occur in the context of slow economic growth

10. Economic Growth: Transitory Contributors Impact on GDP Growth, Percent Change ARRA & Inventory Change Factors that Drove Strong Growth Earlier Are Dissipating %

11. Economic Growth & Job Creation Percent Change & Thousand Jobs Net Other GDP Growth Net Other = All, excluding inventory changes and ARRA impacts % Jobs Synchronized Growth

12. Sub-Prime Financial Crisis Energy Labor Markets 2006 2008 2007 2009 2010 State Deficits Economic Adversity Abates Mid-2010

13. Stimulus: Job Creation Estimates: Jan. 2009 Million Jobs Obama Economists 2009-2010 PCA Unemployment: 7.0% Unemployment: 8.8% Job Estimates have large impacts on Cement/Concrete recovery assessments.

14. Stimulus Overview: Jan. 2009  Obama’s $800 billion plan may not be enough.  Obama economists expect an additional 2.8 million jobs lost. And plan aimed at creating /saving 3.7 million jobs.  PCA estimates that 8.5 million jobs may need to be created/saved. Stimulus plan required = $1.5 trillion (conservative)  And….Obama Economists implied it…..  Taxpayer pushback, politics prevented full initiation for now…  Don’t be surprised if a second stimulus plan materializes.  New Highway Bill may fit requirement ($400 Billion = PCA)  Delayed passage dovetails with 10% unemployment and may fly under radar and taxpayer pushback

15. Criteria For Housing Recovery

16. Ingredients for a Starts Recovery Inventory no higher than 5 months supply Price stability Carry costs erode expected ROI. Weaker the price increases…lower the months supply trigger point. Homebuilders Expected ROI

17. Foreclosures Accelerate Foreclosure Impacts Add to Inventory Depress Prices 2.8 Foreclosures in 2009. 871K Bank possessions. Equates to one out of every 5 homes on the market. Depressed Homebuilder ROI Adds supply. Bank owned properties discounted. Pressures new home prices. Longer carry costs. Lower revenues. Erodes expected ROI. Delays recovery in starts.

18. Single Family: Foreclosure Analysis

19. Residential: Re-Set Scenario $ Billion Subprime Resets Alt-A Option Adjustable

20. Residential: Bank Possession Projections Million Homes Bank Possession Rates were depressed in 2008-2009 Due to Moratoriums. Banks take care backlogs in 2010-2011. Possession rates decline to “normal”.

21. Threat to Inventories, Pricing PCA considers….  Mortgage Reset Volume  Toxicity of Mortgage Reset Portfolio  Sensitivity to Unemployment  Estimates put into PCA estimates for job growth and unemployment  Bank Possession Rates PCA concludes….No Substantive Housing Starts Recovery Until 2012

22. Single Family: Where Does It Recover Regional Timing & Magnitude

23. Mortgage Delinquency 90 Days + Source: FRB

25. Single Family Cement Outlook

26. Residential Cement Consumption Thousand Metric Tons - 29.6 MMT 55% of Total Cement Consumption decline is attributed to residential Residential sector’s adverse impact on cement consumption has run its course.

27. Ingredients for a Public Recovery

28. Aaa A Ingredients for a Public Cement Recovery Highway/Street Cement Consumption ARRA Stimulus State Fiscal Sterilization Outlays accelerating. Design & concrete intensive projects roll out last. Decline in discretionary state cement consumption have been massive during past three years. 2009: 0.6 MMT 2009: -5.4 MMT Aaa A 2010: 4.1 MMT 2010:-0.5 MMT

29. State Sterilization Sterilization by State Fiscal Conditions

30. Highway Construction as Percent of Total Budget Real highway/Real State Expenditures PCA ‘s Assumptions Extremely Conservative.

31. Discretionary State Highway Cement Consumption Thousand Metric Tons

32. ARRA-Led Recovery

33. ARRA Spending Assumptions Billion $

34. ARRA Spending Composition Assumptions Billion $ Resurfacing Widening & New Route Bridge Chart Excludes “Other” Spending

35. Nonresidential Drag

36. Commercial Nonresidential Drag Thousand Metric Tons

37. Near Term Implications

38. Portland Cement Consumption Thousand Metric Tons - 54 MMT Growth Rates 2007: - 9.6 2008: - 15.1 2009: - 26.9 2010: + 2.6 2011: + 6.7 2012: + 8.1 2013: + 14.3 2014: + 5.9

39. Market Imbalances - Changes in Cement Consumption Tons + Capacity Expansion Tons 1973-74 1980-82 1990-91 2000-01 2006-2010

40. Cumulative Market Imbalances Million Metric Tons

41. Portland Cement : Utilization Rates Percent Utilization Based on Clinker Capacity

42. Beyond the Crisis Ten Year Peak-to-Peak Recovery

43.  Stimulus spending must be paid for…resulting in higher interest rates, higher taxes and potentially higher inflation….  …and…American consumer..the engine of US economic growth may show significantly different spending patterns…  …combining for the potential of slower longer term economic growth (50 basis points).  …But even with these gains…past cyclical peaks are not expected to materialize until 2015. After the Crisis

44. Portland Cement Consumption Thousand Metric Tons - 54 MMT Growth Rates 2007: - 9.6 2008: - 15.1 2009: - 26.9 2010: + 2.6 2011: + 6.7 2012: + 8.1 2013: + 14.3 2014: + 5.9

45. New Highway Bill

46. Regulatory Impacts Most Significant Threat To Domestic Cement Production in History

47. Beyond the Crisis: 2013-2015  Plant re-openings.  Not synchronized.  NESHAP  Potential of 15 million metric tons of capacity lost.  CISWI  Costs increase.  Occurs in context of synchronized world growth  High freight rates. How will market be sourced?  Imports? New Investment?

48. Cement Outlook: 2010-2015 Ed Sullivan, Chief Economist PCA PCA Fall Meetings September 2010 Named Most Accurate Forecaster By Chicago Federal Reserve, 2009