US infrastructure hopes
US President Donald Trump earlier this week outlined his trillion-dollar infrastructure plan that aims to once again make the country a nation of "builders" by giving states and localities the ability to address their own critical infrastructure needs, reducing the wait time for the approval of projects and partnering with the private sector.
Speaking in Cincinnati, Ohio, on Wednesday, President Trump has dedicated US$200bn in his budget to spur at least an additional US$800bn in spending by states, municipalities and the private sector to replace the country's "crumbling infrastructure" with new roads, bridges, tunnels, airports and railways. In particular, the president underlined the need for investment in the nation’s waterway infrastructure which are vital for transporting the country's goods, but given their current condition, are causing delays and "preventing the US from achieving its economic potential." According to the American Society of Civil Engineers (ASCE), most of the locks and dams needed to travel the internal waterways are past their 50-year life span and nearly 50 per cent of voyages suffer delays. A statement by the White House said the waterway system requires US$8.7bn in maintenance, with the maintenance backlog only getting worse.
Outlined plans
Mr Trump is pushing to rebuild the infrastructure by partnering with the private sector and "getting the government out of the way." To spur growth, he plans to reduce permitting time from 10 to two years and slash regulations to speed up the decision making process.
Federal funds will be divided into four categories:
- a mixture of loans and grants to "transformative projects, such as air traffic control privatisation.
- grants to rural areas to repair bridges, roads and waterways
- states and cities will receive grants to meet their own infrastructure needs
- qualified projects of regional and national significance, such as those created under the Transportation Infrastructure Finance and Innovation Act, will receive loans.
Trump has not detailed the source of the US$200bn or the breakdown in spending. The administration has previously said a full legislative package could be ready by the third quarter. However, some commentators argue that much more than US$200bn in direct federal spending is required to meet the nation’s needs and that relying on states, municipalities and the private sector won’t get necessary work done. Moreover, Presidents Bush, Obama and Trump all campaigned for increased infrastructure spending, but very little has occurred to date. Government construction continuously declined by 23.5 per cent between 2009-14. It has increased a mere five per cent since 2014.
Cement sector gains
If Mr Trump's proposals do move forward, it could mean large gains for leading building materials producers including LafargeHolcim, CRH HeidelbergCement, Cemex and Buzzi Unicem, which have big US businesses, as well as domestic companies such as Martin Marietta Materials, Eagle Materials and Ash Grove Cement. The Portland Cement Association has welcomed the initiatives, with the cement industry body's Chairman and CalPortland President and CEO, Allen Hamblen, joining the President at an event highlighting the need for investment in the nation’s waterway infrastructure. “Cement companies are both a supplier and user of America’s waterway infrastructure,” said Mr Hamblen. “It was an honour to join the President at this event, as infrastructure continues to be such an important issue for the cement industry and the nation’s economy,” he added.
With infrastructure spending expected to come later rather than sooner, PCA Chief Economist, Ed Sullivan, maintains a moderate cement shipment growth forecast in the short term. Weighing market data and conservative baseline estimates for infrastructure spending and tax reform, he projects US cement shipments will increase at 3.5 per cent rates for 2017 and 2018. Addressing attendees of the IEEE-IAS/PCA Cement Conference in Calgary last month, Mr Sullivan said: "Infrastructure policies also take time to implement, so you could be looking at 11 to 22 months before new projects truly get underway," he underlined. Nevertheless, with underlying fundamentals supporting economic growth positive, Mr Sullivan noted: “This confidence in stable, sustained growth in cement consumption is likely to be unchallenged through 2018.”
