by Kerry Clines, Senior Editor

Will the demand for building materials increase or decrease?

With all the doom and gloom in the news today, it’s hard to keep a positive attitude about the economy. There are differing opinions on what will happen to the aggregates markets next year, but nearly all predict a continued slowdown in the demand for building materials. That doesn’t, however, mean there’s no light at the end of the tunnel.

The National Stone, Sand & Gravel Association’s eDigest & Washington Watch newsletter published on Oct. 1 reported that the U.S. Geological Survey (USGS) released figures showing that an estimated 662 million metric tons of total aggregates were produced and sold in the United States in the second quarter of 2008, a decrease of 15 percent compared with that of the same period of 2007. The estimated production for the first six months was 1.09 billion metric tons, a 16-percent decrease compared with the same period of 2007.

The USGS estimated that 635 million metric tons of crushed stone were produced and sold during the second quarter of 2008, a decrease in production of 14 percent compared to the same period of 2007. The agency estimated that U.S. output of construction sand and gravel in the second quarter was 275 million metric tons, a decrease of 18 percent compared to the same period of 2007.

In the Oct. 2 newsletter published by the Association of General Contractors of America (AGC), News & Views, Ken Simonson, AGC’s chief economist, said the upheaval on Wall Street is delaying or stopping projects all over the country, even some that are already underway. “Developers who had lined up construction loans from Lehman Brothers have found the check wasn’t in the mail this month,” he said, “forcing contractors to front the money – if they can find it – or walk off the job. For projects that contractors expected to start this fall, the developers are finding the lending window has been shut for now, or the revenue assumptions for the finished development no longer look valid.”

Simonson added that many states are forecasting less income and sales tax revenues and more social welfare spending. As a result of that, and the necessity of a balanced state budget by the end of the fiscal year, construction projects would be delayed, scaled back, or cancelled. Simonson said he doesn’t expect state and local revenues to bounce back right away, but that a “stimulus” package to appropriate funds for public works could resuscitate construction.

A new research report published by Global Industry Analysts, Inc. says that not all the news is bad, however, especially on the global front. The report, Building Materials: A Global Outlook, states that increasing industrialization and rising living standards in developing countries in Asia, the Middle East, Africa, Eastern Europe, and Latin America will be key factors for growth in building materials, as will rising income levels and government initiatives to encourage construction of energy-efficient buildings.

It also notes that despite slow economic recovery and sluggish residential construction activity in the United States and North America, demand for cement and concrete additives will continue to increase based on wide application, but at a slower pace. The market for aggregates will be propelled by rising urbanization, growing population, commercial/industrial construction, and renovation activities.