Are we at a demand peak for aggregate?

We are now in the seventh year of increases in aggregates demand.

Gains in nonbuilding (186 million tons), residential (182 million tons) and nonresidential (53 million tons) have driven the 22 percent increase in demand since 2009. Most of the gains have occurred over the last two years, as all three segments supported higher levels. By region, the Southeast and West show continued gains while energy regions lag.

 

With a lot happening in the next year, including a presidential election, European Union disruptions, negative interest rates and ISIS activities, the outlook for continued aggregates demand increases becomes less definite.

A slowdown in construction contracts that signals a sharp decline has not yet taken place. Still, this economy – the world economy – is different than it once was. People are more cautious these days. Because of this, we have projected a slowdown in aggregates demand in 2017. A weaker housing sector is the cause of most of the slowdown. In addition, we are underbuilding based on normal demographic demand models.

We are not operating in a normal world. The demand for higher home sales seems nowhere to be found. We may be at the cyclical peak now, even though demand remains historically low.

The strongest segment for 2017 and 2018 will be nonbuilding, as the highway bill and improved state and local budgets help to finance more public works.

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Dr. David Chereb has many years of experience forecasting construction materials, and his web-based forecasting models have captured every major turning point in materials demand for more than 15 years. Chereb received his Ph.D. in economics from the University of Southern California. He can be reached at david.chereb@sc-marketanalytics.com.