Construction Capacity:

Aggregate and Cement Production

Construction Capacity:

Aggregate and Cement Production

Katie Shattuck 9 March2010

Aggregate Supply

Note: *China production is divided by 10 for scaleSource: USGS ; European Aggregates Industry; UN data

1. Use aggregate data from country specific geological surveys (non-UN data)2. Otherwise, cement used as a proxy3. If neither is available, use UN data

Total: 34.7B

The historic maximum global production of aggregate is 34.7B. However, using JP Morgan’s cement forecast, we will need 65.9B tons of aggregate in 2025.

Aggregate Supply Bottlenecks

Permitting: Regulations restrict the output of aggregate even in aggregate rich areas

Reserve Shortage: Certain geographies will run out of aggregate reserves in <50 years

Transportation: High bulk weight and low unit volume makes aggregate costly to transport. In California, transporting aggregate can cost $0.15 / ton per mile. Transporting aggregate 30 miles would consequently cost $4.50 / per ton.

Prices: Aggregate prices vary widely by region due to the local nature of aggregate demand, in California we see a range of $7-22 per ton.

Resource Competition: Construction generally rises with GDP growth. As global GDPs continue to rise, sea ports will need to compete with other construction projects for aggregate.

Cement Supply Bottlenecks

Resource Competition: Construction generally rises with GDP growth. As global GDPs continue to rise, sea ports will need to compete with other construction projects for cement.

Energy Requirements: Energy costs represents 32% of cement manufacturing costs and 15% of cement’s total selling price. Cement manufactures are reducing their energy consumption, but energy will increasingly be considered a scarce resource.

RegionCAGR

(2010-2025E)

Western Europe 1.5%

North America 2.0%Australia 1.0%

Japan 0.0%

Eastern Europe 3.0%Latin America 2.0%Asia Ex-China 6.7%

China 3.0%Middle East 3.0%

Africa 5.0%Total 3.6%

SectorCAGR

(2010-2025E)

Transportation 0.3%

Industrial 1.1%

Commercial 0.9%

Residential 0.7%

Total 0.8%

Cement Demand Growth US Energy Demand Growth

Cement and Aggregate are a key component of a sea barrierLong Beach Port Example

In the Long Beach example, we need 12.021 million m3 of concrete, or 424.518 million ft3. With the above 20’ x 12’ x 1’ wall unit, we would need 1.7 million units.

Concrete Use Volume Required (m3) Implied Aggregate Required

Dyke Foundation Material 9,570,080 8,905,491

Dyke Core Material 2,451,000 2,280,792

Reinforced Concrete includes footing & tie backs, 12’ High Seawall

Material Labor Equipment Total including Overhead & Profit

Min. $126 $179 $29 $445

Max. $146 $193 $31.50 $490

Note: RS Means estimates the price of the base costs of materials, instillation, overhead and 10% profit. These estimates do not include items such as tax, insurance, overtime, consulting fees, quality assurance and environmental protection. Source: RS Means

This translates to a cost of $787 - $866 million for concrete material and installation alone