PCA: US cement demand to see modest decline in 2020-21

The US Portland Cement Association (PCA) forecasts a modest decrease in cement consumption in 2020 and 2021 of 1.5 and 0.9 per cent, respectively.

Its annual Fall Forecast discusses three economic scenarios, all based on a significant increase in COVID-19 infections during the 4Q20. The "U" shaped scenario would entail an increase in COVID-19 consistent with many baseline epidemiologist's projections. In this scenario, the economy achieves a gradual sustained recovery. 2021 cement consumption under this scenario nearly reaches 2020 levels. Demand growth is forecast at around -1.3 per cent in 2020, improving to 0.5 per cent in 2021. Growth is expected to return to the market in 2022 as consumption increases by 1.6 per cent. The PCA thinks there is a 40 per cent likelihood of this scenario occurring.

The "W" shaped scenario would entail an increase in COVID-19 consistent with many high-case epidemiologist's projections. According to this scenario, consumers' retreat, state governments become more active in preventing COVID-19's spread, and a two-quarter recession develops in 2021. Cement consumption's decline is more acute in 2021, forecast at 3.4 per cent following a 1.8 per cent decline in 2020. Growth is not expected to return to the market until 2022, when demand is predicted to increase by 1.3 per cent. The path of recovery under this scenario is also slower. This “Growth Interrupted” scenario has been given a 25 per cent likelihood.

 A "Vaccine" scenario, the best possible outcome, which follows the "U" through the first half of 2021 and a vaccine is widely distributed by third quarter 2021. Under this scenario, cement consumption grows throughout the forecast horizon. Following a 1.3 per cent contraction, market growth is predicted to accelerate from 0.7 per cent in 2021 to 5.1 per cent in 2022. The PCA has attributed a 35 per cent likelihood to this scenario.

"We think that the gradual sustained recovery, the 'U', has the largest likelihood followed by the 'Vaccine' scenario. The growth interrupted 'W' scenario is the least likely," said Ed Sullivan, PCA senior vice president and chief economist. "Nonresidential will be among the weakest construction sectors specifically within retail, hotel and office. Combined that accounts for almost 90 per cent of the declines we're expecting in this sector."

Federal support has been successful in preventing a deeper and more prolonged decline, but insufficient support levels over the next two quarters could hinder recovery, according to the PCA. In addition, uncertainty surrounding the aftermath of the presidential elections and adverse economic news could negatively impact construction order books.