Moody's Sees Weak Demand for Building Materials in 2010
The demand for building materials will continue to be low in 2010, resulting in reduced pricing power and profitability for most of next year, Moody’s Investors Service wrote in a new report. Demand for cement, aggregates and ready-mixed concrete will continue to decline, hurting revenue and cash flow for materials industry companies. The decline in demand will come primarily from nonresidential construction, which is projected to decline nearly 9% said Moody's senior vice president Glenn Eckert. Although the falloff in nonresidential construction could start to let up in 2011, the recovery in building-materials shipments will be slow and painful, he added. However, public construction and infrastructure projects, primarily those funded by government stimulus programs will be a boost for the materials industry. After four years of steep declines, residential construction will enter a period of weak but stabilizing activity. “Foreclosures and high unemployment will weigh on demand for newly built homes, suppressing any substantial up tick in demand for building materials from this sector for much of next year,” Eckert said. Write to Austin Kilgore.