To make matters worse, the bottom hasn't fallen out of the commercial market yet. “The nonresidential construction market is going to be much weaker in 2010 than it was this year,” Thompson says. Hotels, shopping centers, and office buildings all have excess capacity. Few new ones will be built in the near future.
Gary Graziano, the vice president of marketing for High Concrete, a pre-cast producer in Denver, Pa., agrees with Thompson. “Last year was a record sales year for us. This year, the opportunities are significantly reduced,” says Graziano, who expects sales in 2010 to be 5% to 20% lower than 2009.Glimmers of light
Not all of the news is bad. A July 2009 study commissioned by BUILDER, TCP's sister magazine, found Americans are much more positive about their own financial situation than they are about the nation's and are much more confident about buying a new home. Of the 686 people polled in BUILDER's online survey, 59% said that it is an “okay” or a “good” time to buy a new home.
Indeed, by the middle of summer, home prices had fallen enough to lure some buyers back into the market. Home prices even showed an uptick in eight major cities, leading many to believe housing had finally bottomed.
On the commercial side, producers are eager to see benefits from the $787 billion American Recovery and Reinvestment Act, or the stimulus bill, Congress passed early this year. They hope public works projects can help fill the gap created by the faltering housing and commercial markets.
While very little of the infrastructure spending allotted so far has been concrete-intensive, many hope that changes in the near future. Some have criticized the plan for spending too little money this year when it is needed the most to ease rising unemployment.Consolidation on hold
Another fallout from the economy: The giants of concrete have ceased consolidating. Vulcan Materials' acquisition of Florida Rock in 2007 was the last major North American acquisition by any producer with revenue in 2008 over $2 billion. Germany's Heidelberg Cement bought Hanson of the United Kingdom, also in 2007.
Overall, TCP estimates revenue for the top 100 producers fell 7% from 2007 to 2008. But some suffered more. For example, Cemex has been hurt especially bad from the poor housing market in Florida. Its revenue in the fourth quarter 2008 fell 23%.
Analysts believe that concrete pricing should remain relatively consistent throughout the slowdown because global cement prices have stayed level.
Last year, the producer price index for concrete rose by 2.6%. Global Insight predicts it will grow by 2.2% in 2009 before a 0.6% drop in 2010. The U.S. Bureau of Labor and Statistics generates the PPI to track the average change in selling prices received by domestic producers for their product.