World of Concrete

Cement Outlook

Ed Sullivan, Chief Economist PCA

World of Concrete

Introduction: Overview

The economy is weakening.

A recession is very possible.

50%

Dependent on job creation and Federal Reserve actions.

Fiscal actions will not avert recession.

PCA’s recession scenario is gaining in probability.

Downside risks to baseline forecast projections.

World of Concrete

Portland Cement: Recession (Scenario 50%) Thousand Metric Tons

450

20,450

40,450

60,450

80,450

100,450

120,450

140,450

1995 1997 1999 2001 2003 2005 2007 2009 2011

Baseline Projections

Recession Projections

Recession More Likely: May not be short or shallow. Trough Point 2009

World of Concrete

Cement Consumption: Long Term

50

70

90

110

130

150

170

190

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Million Metric Tons

Growth in Context of Population Changes, Slower US Economic Growth, Strong Global Growth, Climate Change Legislation and the “Green” Revolution.

World of Concrete

Long-Term Cement Outlook

2009-2030

World of Concrete

US PopulationThousands of Persons

200,000

250,000

300,000

350,000

400,000

1980 1990 2000 2010 2020 2030

US Population Adds Roughly 65 Million People by 2030 ….

a 22% Increase.

World of Concrete

Demographics: 2007-2030 Population Adds 65 Million Persons

Adds 9.1 Million School-Age Persons Education Construction

Adds 34 Million Retirement Age Persons Medical

Adds 31 Million Households Housing, Retail & Infrastructure

World of Concrete

Long-Term Public Outlook

2009-2030

World of Concrete

Highway Lane MilesThousands of Miles

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

1996 2000 2004 2008 2012 2016 2020 2024 2028

Just to Maintain Current Highway Congestion Levels, Federally Aided Highways Must Expand Nearly 25% by 2030 . Given 49 Million Additional

Licensed Drivers.

World of Concrete

Pacific

MountainWest North Central

East North Central

SouthAtlantic

East South

Central

District of Columbia

West South Central

NewEngland

Middle Atlantic

51 - 70 mls/100031 - 50 mls/1000≤ 30 mls/1000 71 – 90 mls/1000 ≥ 90 mls/1000

2007 Road CongestionLane Miles per 1,000 Licensed Drivers

World of Concrete

Pacific

MountainWest North Central

East North Central

SouthAtlantic

East South

Central

District of Columbia

West South Central

NewEngland

Middle Atlantic

51 - 70 mls/100031 - 50 mls/1000≤ 30 mls/1000 71 – 90 mls/1000 ≥ 90 mls/1000

2030 Road CongestionLane Miles per 1,000 Licensed Drivers

World of Concrete

Cumulative CO2 Impact From Congestion

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

1,000,000,000

2005 2010 2015 2020 2025 2030

Metric Tons of C02

2007 Urban Mobility Report: 2007 Urban Mobility Report:

3 Billion Gallons of Fuel Wasted Due to Congestion 3 Billion Gallons of Fuel Wasted Due to Congestion 30 Million Metric Tons of CO2 Emissions30 Million Metric Tons of CO2 Emissions

Addressing Infrastructure Needs Should be Part of a Comprehensive Climate Change PolicyAddressing Infrastructure Needs Should be Part of a Comprehensive Climate Change Policy

World of Concrete

Medicaid Pressures Build

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1970 1995 2004 2009 2014 2019 2024 2029 2034

Billions of $

Blue/Solid: Total Medicaid SpendingBlue/Solid: Total Medicaid Spending

Red/Striped: State Medicaid SpendingRed/Striped: State Medicaid Spending

2032: State Medicaid Spending Exceeds One Trillion $2032: State Medicaid Spending Exceeds One Trillion $

21.5% of Total 21.5% of Total State State

ExpendituresExpenditures25%25%

30%30%

34%34%

World of Concrete

Will Medicaid “Crowd Out” Highway Spending?

$30

$40

$50

$60

$70

$80

$90

$100

2007 2012 2017 2022 2027

Billions of Real State Spending Targeting Transportation

Transportation Spending: Transportation Spending: Constant 8% Share of BudgetConstant 8% Share of Budget

Transportation Spending: Transportation Spending: Share Reduced to 5% of Share Reduced to 5% of

BudgetBudget

Transportation Spending: Transportation Spending: Share Reduced to 7% of Share Reduced to 7% of

BudgetBudget

Gasoline Tax Increases Must Be Viewed in the Context of Future Fiscal Pressures Facing StatesGasoline Tax Increases Must Be Viewed in the Context of Future Fiscal Pressures Facing States

World of Concrete

Long-Term Residential Outlook

2009-2030

World of Concrete

Per Home, Lifetime C02 Savings ICF Home Over Frame

0

10

20

30

40

50

60

70

80

90

100

2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057

Co2 Metric Tons, Per Home

Additional C02 Emitted by Cement Production

Total Heating & Cooling C02 Saving: 92 Tons per Home

Conservatively Assumes 50 Year Life of Home

World of Concrete

ICF & Related Systems: CO2 Savings

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

2007 2012 2017 2022 2027 2032

Metric Tons of CO2

Gains Achieved Though Energy Savings In Gains Achieved Though Energy Savings In Space Heating & CoolingSpace Heating & Cooling

2030: Housing Starts Average 1.9 Million Annually. ICF & Related Systems Reach 30% Market Share2030: Housing Starts Average 1.9 Million Annually. ICF & Related Systems Reach 30% Market Share

10% of Total 10% of Total Housing StartsHousing Starts 20%20%

25%25%

30%30%

World of Concrete

Potential “Green” Gains: ICF & Related Systems

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2007 2012 2017 2022 2027

Incremental Gains in Cement Consumption, Metric Tons

2030: Housing Starts Average 1.9 Million Annually. ICF & Related Systems Reach 30% Market Share2030: Housing Starts Average 1.9 Million Annually. ICF & Related Systems Reach 30% Market Share

10% of Total 10% of Total Housing StartsHousing Starts

20%20%

25%25%

30%30%

World of Concrete

Long-Term Cement Consumption Outlook

2009-2030

World of Concrete

Cement Share of Cementitious Materials

75%

77%

79%

81%

83%

85%

87%

2000 2005 2010 2015 2020 2025 2030

Share of Total Cementitious Materials

Increased Use of Fly Ash and Slag Reduces Cement ShareIncreased Use of Fly Ash and Slag Reduces Cement Share

World of Concrete

Cement Consumption: Long Term

50

70

90

110

130

150

170

190

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Million Metric Tons

World of Concrete

Supplying the Beast

Meeting Long Term Requirements

World of ConcreteU.S. Supply Balance: No New Capacity Expansion Plans

5060708090

100110120130140150160170180190200

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

2023

2026

2029

Million Metric Tons

Cement Consumption

Clinker Production

Assumes No New Capacity: 2011-2030

Impo

rts

World of Concrete

Supply Gap Grows: Increased Dependence on Imports?

-40

-20

0

20

40

60

80

1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 2023 2027

Million Metric Tons

Cement Supply Gap

Assumes No New Capacity: 2011-2030

World of Concrete

Freight Rates: Cyclical or Structural Trends ?

$ Per Metric Ton

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2001M1 2002M1 2003M1 2004M1 2005M1 2006M1 2007M1

HANDYSIZE 28-40,000 DWT Transatlantic U.S. East Coast/U.S. Gulf

HANDYMAX 40-50,000 DWT South East Asia U.S. Gulf

World of Concrete

Conclusions

Industry Leadership

World of Concrete

Cement: Long Term Outlook & Sustainability

Long term vision must discount current, short lived business cycles.

Population and economic growth will fuel growth in consumption.

“Green” advantages of concrete will add to growth.

Fabric of demographic changes presents new challenges.

Climate change legislation offers opportunity and risk.

Global growth adds a new wrinkle to long term supply.

World of Concrete

Cement Outlook

Ed Sullivan, Chief Economist PCA