SOURCE: Rothman Research

Rothman Research

April 12, 2010 08:57 ET

Probing the U.S. Cement Industry

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 12, 2010) - – The cement industry in the U.S. is a major pillar of the U.S. economy and the core of the construction industry. It encompasses 39 cement companies, with 115 cement plants spread in 36 states, and the top 5 companies, including CEMEX, S.A.B. de C.V. (NYSE: CX), in this space in terms of volume manufacture over 51% of the U.S. cement. In recent years, however, the industry seems to be suffocating as though it is being walled in concrete. Experts agree that the industry is going through the toughest phase of its history as its dependency on a diseased construction and infrastructure industry has been dire. The industry challenges started with the mortgage foreclosure crisis which impacted negatively on residential construction. With the successive fall of the banking and financial systems, things got worse as nonresidential and public constructions were soon caught in the whirlpool. Cement production took a dive from over 100 million metric tonnes in2006 to close to 80 million in 2008.

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However, as the economy starts to recover slowly, cement production seem poise to recoup backed by the federal stimulus bill, and enduring opportunities for cement use would begin to show signs of growth fueled by population expansion (estimated to grow by 87 million by 2035), an improved competitive position and fundamental changes in energy sourcing. "The recovery in the cement industry could be in terms of years and not months, however, the outlook for growth in the long-run is there," commented Mathew Collier of, "near-term outlook, nonetheless, looks calamitous for some companies. US Concrete Inc. (NASDAQ: RMIX), for instance, reported in its fourth quarter earnings' release that current economic environment has casted doubts on the company's prospect to continue operating. The company has major issues with its liquidity which plummeted to less than $25 million at the end of February."

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In a bid to weather the economic downturn, the cement industry players have trimmed their already decreasing workforce opting for automated production systems which at the same time increases efficiency.

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