georgia construction aggregate association management workshop february 17, 2009 daniel m harrington

Georgia Construction Aggregate Association Management WorkshopFebruary 17, 2009

Daniel M Harrington

2

AGENDA

Global Cement Industry

North American Cement Industry

North American / Georgia Key Statistics

Challenges and Solutions

Global Cement Industry

4

World Cement Consumption

Source: US Geological Survey

5

47%

6%4%3%

2%

2%

2%

34% China

India

U.S.

Japan

Korea

Russia

Spain

Other

World Production, 2006

6

World Cement Consumption

Source: U.S.G.S., U.S. Census Bureau, International Cement Review,

Statistics Canada.

7

World Cement Consumption

Source: US Geological Survey

8

2009 Scenario-Lower cement consumption across the globe

9

2009 Scenario – Major Export & Import Regions

10

Major Trends in International Cement 2009

China is slowing down more than expected – Exportable surplus acc. To BNP is 60 Million tons

Global market has become a “Buyers’ market” again, after four years

FOB prices are declining around the world

More cement will hit mature markets with low freight costs and overcapacity

Africa and NAM will be threatened by low-cost cement imports

Surplus management will become a major issue

North American Cement Industry

12

0

20

40

60

80

100

120

'02 '03 '04 '05 '06 '07 '08 '09 '10

Million Metric Tons

Estimated Clinker Capacity (2002 – 2010)

13

North American Clinker Capacity (2008 Estimate)

Lafarge15.79%

Holcim12.85%

CEMEX12.15%

Lehigh8.61%

Buzzi6.59%

Other44.01%

Source: 2007 PCA Labor Energy Input Survey

Units: 000 Metric Tons

14

Capacity Expansion

Thousand Metric Tons

0

2,000

4,000

6,000

8,000

10,000

12,000

2006 2007 2008 2009 2010 2011 2012

Stated U.S. Capacity Stated U.S. Capacity ExpansionsExpansions

Stated Southeast Stated Southeast Capacity ExpansionsCapacity Expansions

Share of U.S. Expansions

2008: 0.0%

2009: 0.0%

2010: 42.9%

2011: 61.7%

Source: PCA

15

Portland Cement Consumption (MMT)

100908070605040302

140

130

120

110

100

90

80

Forecast PerformancePortland Cement (MMT)

Trend Forecast Actual

Source: PCA

16

Cement Consumption

Apparent Use ofPortland Cement by Market

(5 Year Average Share)

Nonresidential14.5%

Other7.1%

Residential33.8%

Public44.6%

Source: PCA

17

100908070605040302

140

130

120

110

100

90

80

Forecast PerformancePortland Cement (MMT)

Trend Forecast Actual

Cement and Clinker Imports (MMT)

Source: PCA

18

Cement & Clinker Imports by Census District

Source: PCA

19

100908070605040302

155

150

145

140

135

130

125

Forecast PerformanceCement Intensity Ratio (000 Tons per $ Billion Construction)

Trend Forecast Actual

Cement Intensity Ratio

(000 Tons per $ Billion Constructing

Source: PCA

North American / Georgia Key Statistics

21

100908070605040302

900

850

800

750

700

650

600

Forecast PerformanceTotal Construction (Billions 2000$)

Trend Forecast Actual

U.S.A. Total Construction (Billions 000$)

22

Projected Peak-to-Trough DeclineProjected Peak-to-Trough Decline

Single Family PermitsSingle Family Permits

ME

RI

MA

VTNH

AL GA

SC

TN

FL

MS

LATX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

KY

WVVA

NC

MD

DE

PA

NY

CT

NJ

HI

0% to -51%

-52%% to -61%

-62% to -75%

-76% >

Projected Peak-to-Trough Decline

Single Family Permits

Source: PCA

23

Deficit Share of Total ExpendituresDeficit Share of Total Expenditures

State Fiscal HealthState Fiscal Health

ME

RI

MA

VTNH

AL GA

SC

TN

FL

MS

LATX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

KY

WVVA

NC

MD

DE

PA

NY

CT

NJ

AK

HI

No Shortfall

Source: PCASource: PCA

0% to 1% 1.1% to 3.6% 3.7% +

State Fiscal Health

Deficit Share of Total Expenditures

Source: PCA

24

As of October, 2008

As of October, 2008

States in RecessionStates in Recession

ME

RIMA

VTNH

AL GA

SC

TN

FL

MSLA

TX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

IL IN

MI

OH

KY

WVVA

NC

MD

DE

PA

NY

CT

NJ

AK

HI

Recession

At Risk

Growing

Source: PCASource: PCA

States in Recession

Source PCA

25

ME

RI

MA

VTNH

AL GA

SC

TN

FL

MS

LATX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

KY

WVVA

NC

MD

DE

PA

NY

CT

NJ

HI

No Deficit 0-10% 11%-15% 16% +

2009 Fiscal DeficitsDeficit % Share of Total

Expenditures

Source: PCA/Census

26

FISCAL HEALTH - GEORGIASurplus/Deficit Index, 2005=100

Surplus

Deficit

Source: PCA

27

Georgia Construction Permits

Units

Source: PCA

28

Georgia Housing Permits

Units

Source: PCA

29

Public Residential Nonresidential

CementCement

20052005Cement Composition - Southeast

2005 2010

Source: PCA

Cement Consumption

Source: PCA

Challenges and Solutions

32

Challenges and Solutions

We’re in a recession and the local governments have no money

Economy recovery plan

33

34

Portland Cement Consumption

Peak (2005)-to-Trough (2009) Decline:

40 MMT (Worst in History)

(On a Percentage Basis: -32%)

Declines Continue Through 2010.

Source: PCA

35

Construction Turning Points – U.S.

60

80

100

120

140

160

180

1996 1998 2000 2002 2004 2006 2008 2010 2012

Residential 2006

Public 2008

Nonresidential 2008

1996 = 100

Source: PCA

36

Portland Cement Consumption

Declines Continue Through 2010.

Peak (2005)-to-Trough (2009) Decline:

40 MMT (Worst in History)

(On a Percentage Basis: -32%)

37

Cement Consumption: U.S. Long Term

Million Metric Tons

Source: PCA

38

2008 2009 2010 2011

No Stimulus 95.6 MMT 81.1 MMT 74.7 MMT 79.4 MMT

- Percent Change -13.2% -15.1% -8.0% +6.3%

With Stimulus 95.6 MMT 87.4 MMT 92.1MMT 97.4 MMT

- Percent Change -13.2% -8.6% +5.3% +5.8

Stimulus Impact 0.0 +6.3 MMT +17.4 MMT +18.0 MMT

- Percent Increase ---- +8.4% +23.3% +22.6%

Stimulus Impacts

Source: PCA

39

Cement Consumption – Georgia 1998 - 2012

(000) Metric Tons

Source: PCA

40

Challenges and Solutions

Industry has downsized, consolidated and globalization will continue to occur

Federations of associations Regulatory concerns will intensify (whether water, air,

or solid) Manufacturing and engineering solutions to

environmental needs

41

Labor Resources

Employee Hours per 000 Tons Produced (US & Canada

Source: PCA

42

Energy ResourcesMillion BTUs per 000 Tons Produced

Source: PCA US & Canadian Labor –Energy input survey

43

Challenges and Solutions

The Greening of America Sustainability / Environmentally friendly issues

will rise Promotion New products into old markets and Old products

into new markets

44

Competitive Opportunity?

Producer Price Index, 2003 =100

45

More Solutions

Political Action – Grass roots Embrace the “Green Opportunities” Stakeholders Employees “Pull through” marketing Cost Leadership

46

New Cement Based (Aggregate) Products Gaining Popularity in Southeast

47

Roller Compacted Concrete - RCC

48

Cement Treated Agg Base Construction - 2008

49

Inverted Base Construction

Asphaltic Concrete PavingFor Protection of GAB Layer

Graded Aggregate Base

Cement Treated Agg Base

Subgrade

2008 Georgia

50

Pervious Concrete holds up and

cools runoff

When used as a Stormwater system in GA, needs an Aggregate recharge bed 6-12”

Typically 6” pervious in parking areas

High density ABG pavers/Pug mill opportunity

Pervious Concrete PavementPervious Concrete Pavement“Green Movement”“Green Movement”

51

2008 Cobb Co Airport – 7 “ Concrete Overlay (vs 5” asphalt)

Concrete Overlays

52

Currently SE – 6 active RCC contractors (TN, GA, SC,AL)

Add at least two more for CTAB

Plus public agencies performing Tests: GDOT, TDOT, & the city of Chattanooga

Steady Increase in Projects Steady Increase in Projects for 5 Yearsfor 5 Years