Monthly Archives: February 2011

Cement Demand Diffusion Index Shows Breadth of Recovery

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I like to look at the diffusion index of monthly state portland cement consumption. Each month the diffusion index is the count of the number of states that experienced an increase in portland cement shipments from the same month a year ago. It shows the geographic breadth of cement demand growth without regard to the size of the state markets. The accompanying chart shows six-month moving averages (6mma) of year-over-year monthly percent changes. Averaging helps smooth out the volatility of monthly cement shipments, to give a clearer picture of cyclical trends.

In November 2008, two months after the collapse of Lehmann Bros. and the near collapse of the world financial system, not one state had an increase in portland cement consumption from November 2007. Zip, zero, nada. That had never happened before. The low point for the 6mma came in August 2009 at 6.2%. The diffusion index peaked in July 2004 at 75.2% for the 6mma. In the two prior years, the index for individual months was over 90% twice. The November 2010 portland cement diffusion index, the latest month available from the U.S. Geological Survey (USGS), hit 49.0%, following a 2010 high point in April of 70.6%, just before the government mortgage subsidy program ended. Looking at the 6mma, the 2010 peak was in August at 49.0% with a slow decline to 46.1% in November.

Mirroring what occurred in U.S. homebuilding, cement demand had a spurt of activity early in the year but then slightly tapered off with the end of the government stimulus. Of course, 46.1% is a hell of a lot better than 6.2%, seven times better to be exact. The diffusion index shows that the economic recovery has clearly taken hold in the U.S. cement industry, but it is still a long way away from former good times.

Who am I and what are my goals?

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Who I am

I have been a professional economist for 37 years, and for all but five I have specialized in the North American cement, concrete, and stone industries. In 1979 I became the chief economist for the Portland Cement Association, the trade group for the American and Canadian cement industries. In 1986 I formed by own company, R.O.I. Economic Consulting, so that I could better serve building materials companies and people interested in them. The PCA was a great place to work as an economist, but there were restrictions on what I could discuss. For example, I was not allowed to talk about cement prices because of U.S. antitrust laws. Having my own independent firm freed me from these constraints and allowed me to expand my expertise to other building materials, including concrete, aggregates, gypsum, slag, and lime.

In the past 25 years, I have done research for virtually all the major cement companies operating in the United States and Canada, including the largest international companies: Holcim, Lafarge, Cemex, Heidelberg, etc. I have been the North American correspondent for the International Cement Review since 1990. Numerous banks, hedge funds, brokerage firms, and government agencies have also requested by services.

My goals for concrete-economics.com

I want to expand my audience and the topics on which I write. Rather than preparing only comprehensive, lengthy reports, this site gives me an outlet for shorter pieces on whatever subjects motivate me to research and write. It also welcomes feedback from readers, so that I get their thoughts and opinions. My emphasis will be on the North American cement, concrete and stone industries, the construction markets they supply, real estate markets, and the overall economy.

While affected by national and international influences, construction and building materials are fundamentally local businesses. As they say about real estate, the three most important factors are location, location, location. Geography is a key to understanding these industries. My postings will stress regional, state, county and city markets.

What have I been doing for a living the past 32 years?  I tell cement, concrete and aggregate companies about the outside world and how it affects them. I also tell the outside world about how these industries operate and how they impact the rest of the economy. With the postings on concrete-economics.com, I will provide timely content that hopefully will enlighten and inform all interested parties.