TXI Q2 2009 CC (1/9/09) Notes:
Summary:
Cement prices are stable or slightly increasing. The 20% drop in volumes has been offset by decreased production and imports. The import reduction has occurred eventhough shipping costs are markedly lower. Probably because the international producers are also domestic producers and don’t see a profit in undercutting their own market. Current capacity in the Texas market is about 13 million tons and expected demand for next year is 13 to 14 million tons (down from 17 million tons last year).
Selected Quotes:
“Cement prices in Texas continued to be stable with realized prices up 3% in the November quarter compared to a year ago, and up 1% compared to the recent August quarter.”
“Given the uncertain conditions, the announced cement price increase effective January 1 in California will likely not be successful. But we do expect pricing to be relatively stable in the near term.”
“...total cement shipments declined by 18%. And within that, shipments in our Texas markets of 778,000 tons were down 19% compared to last year’s quarter. And this percentage decline is consistent with the decline in the overall market.... Shipments in California declined 14% to 305,000 tons.”
“Cement prices in Texas increased 3% compared to a year ago and about 1% compared to the August quarter and again those were increases. California cement prices were 14% lower than in last year’s quarter and 5% lower than for the August quarter from last summer.”
“<A – Kenneth Allen>: Well, the shipping costs Derrick have gone down rather substantially over the last quarter, and yet there has not been imports that have come in to displace domestic production. And I believe the reasons for that is what we have articulated for a number of years now that the importers are international cement suppliers and not likely to want to import product into the United States and dump on their domestic production because it’s extremely difficult to cost-justify bringing in lower imports and then having to absorb that with the lost production in sales from your domestic operations.”
“<A – Mel Brekhus>: The trends we’ve seen are the ones that Ken mentioned, where we’ve seen the 20% decline in Texas. And if we were looking forward under this scenario, we believe that that sort of a trend was likely to continue based upon what we’ve seen and what the Portland Cement Association is projecting. So whereas demand may have been 17 million tons last year, it’s going to be more likely in the 13 to 14 million tons this year in Texas.
<Q – Kathryn Thompson>: Okay. And could you remind me what capacity is in Texas right now?
<A – Mel Brekhus>: About 12 million.
<A – Kenneth Allen>: 13.
<A – Mel Brekhus>: I’m sorry, 13 because of the Cemex expansion. If it’s running”
“<A – Mel Brekhus>: .... Unlike California, I think that that we’re going to see some price increases in the Texas region. I don’t know when that will occur. But the trend and the traction is in place to get some of that. I think that what is likely to happen is that historically, January price increases have been deferred until the spring. And it’s too early to tell, but I think that we’ll see that that happen and I don’t know what part of that $15 we’re likely to get. But I think we’re going to get some of it.”
“<Q>: Okay, thanks. And then what’s going on with the imports at the Houston terminal? Can you
talk about – is there inventory there or imports still coming in, have they stopped coming in and
what’s the situation now?
<A – Mel Brekhus>: Yes. There are some imports that are coming in. They are limited at this time. I hesitate to tell you what we’re about to tell you, but here is what I think is happening, Liz. I think that Cemex is no longer importing anything because that’s the G2 I got back from our sales department that Argos is bringing in a modest amount and that Houston Cement which is the escrow...
<Q>: Put the escrow of Eagle, right?
<A – Mel Brekhus>: Yes. And as for Texas Lehigh, escrow and Alamo are bringing in modest amounts because that’s also what we’re hearing from our sales department.
<A – Kenneth Allen>: But imports are down dramatically year-over-year, dramatically in Houston.”
