The magnitude of the single-family construction downturn will play a significant role in determining the level of cement consumption this year and next.

PCA Chief Economist Ed Sullivan reports that current housing market conditions suggest that the decline in residential construction will be deeper than expected.

“The decline in cement consumption arising from the single-family sector this year could reach 7.5 to 8 million tons or roughly a 30 percent decline,” he said. “This will translate into a 6.5 percent drag on total U.S. 2007 cement consumption compared to 2006 levels.”

PCA’s spring forecast had anticipated a 20.5 percent decline from 2006 levels resulting in a 4.5 percent drag.  Single-family housing accounted for nearly 25 percent of U.S. cement consumption in 2005.

High inventory levels are playing an important role in the slow recovery of the single-family housing market.  Sullivan estimates that the current inventory of 4.1 million homes represents an eight-month supply, compared to the desired five-month supply.  Because home sales are diminishing, the correction process most likely will continue until the fourth quarter of 2008.

“Even though single-family housing starts are nearly 30 percent lower than last year, the slow sales have diminished the builder’s ability to improve the inventory,” Sullivan says. “In addition, an expected doubling of the amount of homes entering foreclosure will put additional pressure on the inventory situation.”

About PCA
Based in Skokie, Ill., the Portland Cement Association represents cement companies in the United States and Canada. It conducts market development, engineering, research, education, and public affairs programs. More information on PCA programs is available at www.cement.org.

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