I was recently in the office of a ready-mixed concrete producer who had been a player in what was once a red-hot housing market.
“Four years ago, I drove to work with a knot in my stomach, wondering which customer was going to be mad at me that day because I didn't have enough concrete because of the cement shortage,” he said. “But that's all changed. Now the knot is how I keep cutting costs to make it through this.”
What a pendulum swing in just a few short years.
If we think the ready-mixed concrete industry has been challenging the last 18 months and has more trials ahead in 2009, at least we are not witnessing new greenfield plants or unsubstantiated plant capacity expansions. In fact, producers are closing non-productive plants, parking trucks, or leaving markets altogether. This brings capacity in line with demand.
So imagine the quandary in which the U.S. cement industry finds itself, as demand continues to fall while new capacity is coming online. PCA has issued downward revision after downward revision to its tonnage outlook.
This past fall, cement analyst Roy Grancher released a seminal report on the domestic cement industry, focusing on the capacity expansions undertaken during the boom years of mid-decade and the impact this will have on supply and demand for the next couple of years. Here are the highlights:
These projects will add millions of tons of capacity while the market is driving older plant closures and expansion cancellations, such as Votorantim's plant in Florida.