Aggregates demand to increase sharply after 2013

By |  May 14, 2012

The drop in aggregates consumption during the past five years has been unusually large owing to the recession (of course) and the sharp decline in aggregates intensity. Aggregates intensity has dropped by more than 37 percent since 2006. No doubt the high intensity level of 2006 was unsustainable, but the low level we have today is also unsustainable.

(Note: We are using Aggregates/Employment as a measure of intensity. Aggregates/Employment equals aggregates volume divided by the level of U.S. employment. For example, in 2008, U.S. aggregates consumption was 2.4 billion metric tons and total U.S. employment was 145.2 million workers. The ratio is 16.5 and is shown as aggregates intensity; the amount of aggregates used per employee.)

The low aggregates intensity level in 2012 is one reason we are near a bottom in aggregates demand. The low volumes for 2012-2013 in our forecast are due to the continuation of low intensity values. The slowdown in nonbuilding work, which has a higher aggregates intensity ratio, is the main reason for the low current levels. Since we think nonbuilding will be a lagging segment for construction activity for the next two years, aggregates demand remains in a holding pattern.

When state and local budgets regain their balance as the economy recovers, the intensity ratio will once again move up. By 2016, the intensity level will recover to near its 2008 level. This means aggregates demand will increase strongly after 2013 as aggregates plays catch-up to higher economic output.

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