Building Materials Forecasting Service. Executive Summary: Q2 2010

Transcription

1 Building Materials Forecasting Service Executive Summary: Q2 2010

2 Building Materials Overview Building materials have been hard hit by the recession in the U.S. housing market and the deep downturn in the nonresidential construction industry Building materials have reacted to the downturn by varying degrees depending on the end-market, Materials heavily used in the residential construction sector declined earlier and will recover sooner than materials used in the nonresidential sector Structural wood, for example, has been posting strong declines since 2007, but is expected to turn around this year with a 7.5% increase Lighting fixtures, which are predominately used in nonresidential construction, faced their largest downturns in 2009 and 2010 and will not recover until 2011, when the nonresidential outlook improves Bottom Line: Residential construction activity will improve in 2010, while nonresidential construction activity will not recover until 2011.

3 Construction Outlook Affects Building Materials Purchased Purchases of building materials is driven by total construction activity and varies between construction segments The recovery in the residential construction sector is expected to outpace total construction As a result, we expect robust growth in materials predominantly used in residential construction Construction Outlook (Percent change from a year earlier) Total Construction Nonresidential Residential

4 Residential Building Materials Will Remain Below 2006 Peak = Building Materials Index Nonresidential Buidling Materials Index Residetnial Building Materials Index

5 Residentially Focused Materials Will Recover First 8 Billions of dollars Building Hardware Insulation Gypsum product manufacturing Paint and coatings Asphalt shingle & coating materials

6 Residential Recovery Will Be Uneven; Watch for the Winners Top States for Dimensional Lumber 2600 Millions of dollars, annual rate NEW YORK FLORIDA NEW JERSEY TEXAS CALIFORNIA

7 Infrastructure Construction was Aided by the Stimulus Package U.S. infrastructure spending was lifted by the U.S. stimulus package throughout 2009; however spending has started to wane Total infrastructure spending will contract through the first quarter of 2011 We expect infrastructure construction spending to decline 4.7% in 2010 and another 2.1% in 2011 before returning to an annual growth pattern in 2012 Components of Infrastructure Construction Billions of 2005 dollars, SAAR Highways & Streets Sewer Construction Water Supply Power Transportation

8 Shallower Cycle for Materials Used Heavily in Infrastructure Billions of dollars Cement & Cement Products Window and door manufacturing Asphalt shingle & coating materials Structural Steel and Other Metals HVAC

9 Cement Demand Will Partially Recover Percent change from a year earlier Total Construction Residential Non-Residential and Public Maintenance & Repair

10 Equipment Rental & Leasing Hit Hard During Recession Billions of dollars Structural Wood Machinery and equipment rental and Building Controls and Other Electri Aggregates and Other Stone Products Decorative Details

11 Share of Intermediate Goods Varies by Structure Type Structure types exhibit varying shares of 'Cost of Goods Sold' to value of output. Residential Alterations & Additions Farm Buildings Single Family Residential Water, Sewer & Pipelines Multi-Family Residential Total Construction Highway & Bridges Commercial & Institutional Structures Manufacturing Structures Other Construction 68.8% 66.1% 62.1% 60.1% 56.9% 56.3% 53.2% 52.1% 49.1% 48.9%

12 Renovation Will Lead Eventual Recovery Most Commonly Changed Building Components Building Component Interior Components Lighting HVAC distribution system Interior partitions HVAC Components Power distribution system Exterior Components Windows, skylights, doors Roof system Shell structure, façade, ornamentation Percent of Cases 76% 72% 60% 46% 37% 19% 10% 9%

13 New Construction Spending Dominates Material Demand 400 Billions of dollars, annual rate Residential Manufacturing and industrial buildings Commercial and institutional buildings Highway, street, bridge, and tunnel construction Maintenance and repair of farm and nonfarm residential structures Maintenance and repair of nonresidential buildings Maintenance and repair of highways, streets, bridges, and tunnels

14 Implications for Your Business Intermediate materials spending accounts for over half of total construction spending This year will be challenging for all intermediates, goods and services dedicated to infrastructure investment will be best positioned We expect a rebound in sales of building materials in 2011 with those concentrated in the residential sector best positioned Within the nonresidential sector, goods and services used most intensively by renovation activity will benefit earlier from the eventual recovery There is significant variation in opportunity between states and attention should be paid to the recovery in the housing market and employment