The United States cement industry is in the midst of its largest volume downturn in history. A significant and sustained increase in residential cement consumption is at least a year away. Nonresidential declines are likely to accelerate and the beginning of a turnaround in this sector is not expected until very late 2011. Bureaucratic delays have slowed stimulus monies targeted at infrastructure and gains in cement consumption from the public sector will not materialize until next year.

This downturn comes at a time when many cement companies are engaged in the most aggressive capacity-expansion programs in history. More than 25 million metric tons of new capacity is planned to come on-line by the end of 2013. The combination of large declines in cement consumption and capacity expansion has generated market imbalances. Correction of these imbalances have surfaced in the form of plant shutdowns, depressed utilization rates, import reductions and inventory builds.

With such dire near-term prospects facing the industry, it is sometimes difficult to see the bright long-term potential that may be ahead for the industry.

The current economy remains weak but is beginning a process of recovery. It is likely that the recovery process will be spread out over several years. Once the economy regains it traction, demographic trends become an important factor driving cement consumption. Population in the United States is expected to grow by 87 million persons by 2035 compared to 2008 levels, according to the Bureau of Census April 2005 forecast. With the expected increases in population, there will be greater need for building more schools, roads, homes, retail shops and project requiring new construction activity — boosting the potential for cement demand.

By 2035, for example, the driving-age population will increase by another 49 million more drivers compared to 2008 levels — an increase of 24%. Road congestion will rise dramatically and spread beyond the large cities. Lacking an acceleration in highway expansion, congestion levels will increase significantly by 2035. In today's dollars, this could translate into a $25 billion annual fuel cost to consumers. “Wasted” fuel due to congestion could approach 7 billion gallons and result in 60 million to 65 million tons of additional CO2 emissions. Highway expansion is a necessary ingredient to be considered in any well thought climate change policy. Issues such as highway trust funding and the transportation bill may have a considerable impact on the success in curbing future CO2 emissions.

The potential long-term gains in cement consumption implied by increases highway construction could be amplified by concrete's competitive position relative to asphalt as a paving material. In the past, paving cost estimates favored asphalt — resulting in 94% of all paved highways. New paving realities are now in place — reflecting changes in global oil demand and new refining practices which reduce liquid asphalt production. The new paving realities now show that comparative life cycle and initial bid cost assessments will increasingly favor concrete over asphalt in the foreseeable future. If expansion of new highways keeps pace with demographic changes, roughly 75,000 new lane miles will be paved annually. Every 10% increase in concrete paved roads' share of the new highways translates into as much as 5.5 million metric tons of cement consumption.

Adding 87 million people by 2035 also implies the need to expand the nation's housing base and build homes at a rate of roughly 2 million units annually. Energy and environmental concerns will increasingly play a role in the construction materials used in home building. The superior energy performance of concrete wall systems boost cement consumption.

According to a PCA study, houses built with insulating concrete form walls (ICF) can require up to 44% less energy to heat and 32% less energy to cool than comparable frame homes. In 2005, roughly 7% of all homes built used insulated concrete wall systems. PCA expects its share of these wall systems used in home construction will eventually reach 30% by 2035. If these conditions materialize, the “green” aspects of residential cement consumption could add roughly 8 million metric tons in 2035 than current cement intensities suggest. Other trends, such as changes in building codes to mitigate against natural disasters, could add further to residential cement intensities.

Increased energy independence is a critical ingredient of United States' long-term economic growth. Clearly, world energy markets have been structurally changed with the emergence of strong economic growth among the transitional and developing economies, notably China. Currently, China accounts for 10% of world oil consumption — a figure that is likely to increase significantly during the next two decades. This structural shift in world energy demand suggests a shift to higher sustained energy prices.

A less favorable long-term energy environment, however, may also present new opportunities for cement consumption. According to a recent report by the Energy Information Administration (EIA), United States' energy consumption is expected to increase nearly 24% by 2030 compared to 2006 levels. Sustained high oil and fossil fuel prices, coupled with climate change concerns could result in a resumption in nuclear energy plant construction. By 2009, the Nuclear Energy Institute expects 21 licenses to be submitted to the Department of Energy to commence construction of nuclear plants. Many of these sites include two reactors. The first concrete pour at a new reactor is scheduled for 2013. A typical 1,000 megawatt plant consumes roughly 175,000 metric tons of cement.

The point is simple: The industry is experiencing the most stressful period in its history. The recession will end — eventually. The economy and construction activity will recover. Population growth, structural changes in energy sourcing and an enhanced competitive position could result in significant new long-term opportunities for cement consumption. By 2035, PCA expects cement consumption will exceed 180 million metric tons — reflecting a level 40% higher than record 2005 levels and more than 100 million tons higher than today's depressed levels.