On a recent episode of the ITC Tax Podcast, Mark Dzeda sat down with Ed Sullivan, one of the most respected economists in U.S. policy and market intelligence and longtime publisher of the Sullivan Report covering the cement industry.
With more than two decades of experience advising major institutions, testifying before Congress, and analyzing construction and infrastructure trends, Ed offered a clear-eyed look at where the cement and construction industries stand today—and where they may be headed over the next 12 to 24 months.
Here are the key takeaways.
The Three Biggest Pressures Facing Cement Right Now
According to Ed, the industry is navigating three primary headwinds:
1. High Interest Rates
High interest rates continue to restrain private construction—especially residential housing. Mortgage rates have dampened demand, and elevated borrowing costs are weighing on non-residential projects as well.
For now, this keeps overall construction activity subdued.
2. Infrastructure Funding Uncertainty
The Infrastructure Investment and Jobs Act has been a major funding source for highways and public works. But inflation has eroded much of its purchasing power.
With renewal discussions approaching—and growing federal deficit concerns—future funding levels remain uncertain. That creates hesitation in long-term infrastructure planning.
3. Labor Shortages
Even in a slower construction environment, labor shortages remain acute.
The construction sector faces persistent shortages in skilled trades, including electricians and concrete placement crews. Immigration enforcement trends could intensify these shortages, particularly in regions where undocumented labor makes up a meaningful share of the workforce.
Ironically, the current slowdown is preventing an even more severe labor bottleneck. If construction rebounds strongly, labor constraints could become a major cost driver.
A Potential Turn in 18–24 Months
While the short term remains challenging, Ed sees a plausible shift within the next 18 to 24 months.
Here’s what could change:
- Inflation pressures easing
- Interest rates declining
- A new infrastructure bill emerging
- A potentially more accommodative Federal Reserve leadership stance
If mortgage rates fall into the mid–5% range, significant pent-up housing demand could be released. At the same time:
- Lower long-term borrowing costs would improve non-residential project economics.
- A refreshed infrastructure package could strengthen public works.
- Stronger economic growth could lift net operating incomes across sectors.
If all three major construction drivers—residential, non-residential, and infrastructure—move positive at the same time, Ed projects annual cement demand growth of 3% or more in 2028–2029.
In his words, today feels like “a tale of two cities.” Flat or constrained near term. Potentially strong recovery in the outer years.
Immigration Policy and Construction Costs
Labor remains one of the most critical structural issues.
Concrete placement in particular relies heavily on immigrant labor in certain markets. Aggressive enforcement actions could exacerbate shortages just as demand rebounds.
The likely result?
- Higher labor costs
- Project delays
- Potentially deferred construction activity
These pressures may not fully materialize during a slowdown—but they could become significant during the next expansion cycle.
The Rise of Data Centers and AI Infrastructure
One of the most dynamic growth areas in cement consumption is data center construction.
Cement usage tied to data centers has increased dramatically since 2020—growing from a relatively small base to well over a million tons annually.
Hyperscale data centers and related infrastructure—roads, utilities, water systems, and power generation—are driving localized demand spikes in states like:
- Texas
- Virginia
- Ohio
- Arizona
This growth is tied directly to artificial intelligence expansion and cloud infrastructure.
While data centers still represent less than 2% of the overall 100-million-ton U.S. cement market, the growth rate is significant. In certain regions, hyperscale projects can materially change annual performance numbers.
However, retail construction—currently soft—still consumes five to six times more cement than data centers. So while AI infrastructure is exciting, it remains a supplement, not a replacement, for broader non-residential demand.
Tariffs, Imports & Capacity Constraints
As demand eventually rises, the industry will first increase plant utilization rates. Once utilization approaches roughly 80%, reliance on imports typically increases.
Building a new greenfield cement plant is a multi-year endeavor—often estimated at six to eight years, considering permitting and environmental compliance.
Globally, excess cement capacity exists. That makes import expansion a more flexible solution than domestic plant construction during periods of strong demand.
As for tariffs? Thus far, they appear largely absorbed within the supply chain rather than fully passed on to end consumers. But that dynamic could shift in a stronger recovery environment.
Carbon Reduction and the 2050 Question
The cement industry has made aggressive efforts to reduce carbon emissions through:
- Fuel substitution
- Portland limestone cement (PLC)
- Operational efficiency improvements
However, achieving full carbon neutrality by 2050 would likely require large-scale carbon capture deployment—an expensive and infrastructure-heavy solution involving pipelines and long-term federal support.
The key open question: will government funding and policy alignment support that transition over time?
Oil & Energy Sector Demand
Oil well cement demand represents roughly 5% of total U.S. cement consumption.
While fluctuations in global oil production affect regional demand (particularly in Texas and the Southwest), this segment is unlikely to disrupt the broader national outlook unless extreme volatility occurs.
The Overlooked Factor: AI’s Impact on Labor Markets
Beyond construction inputs, AI itself may reshape the labor market.
Ed expects the transformation to occur in stages:
- Initial hiring restraint (companies rely on AI instead of adding staff)
- Possible short-term job losses in certain sectors
- Longer-term job creation once AI adoption reaches critical scale
For construction, this could become an unexpected opportunity. As AI reshapes white-collar employment, more workers may shift toward skilled trades—especially if supported by community colleges and vocational programs.
In other words, AI may simultaneously drive data center construction demand and help relieve labor shortages in traditional trades.
The Bottom Line for Industry Leaders
The cement and construction industries are currently navigating:
- High interest rates
- Infrastructure funding uncertainty
- Labor constraints
- Policy volatility
But the medium-term outlook presents real upside potential if:
- Rates decline
- Infrastructure investment strengthens
- Economic growth stabilizes
For companies in energy, manufacturing, real estate development, or infrastructure-heavy sectors, the next 18 to 24 months may represent a transitional window—positioning for stronger growth toward the latter part of the decade.
As always, the key isn’t just watching the macro environment.
It’s planning ahead for how it impacts your costs, timelines, tax exposure, and long-term capital strategy.
Want to hear the full discussion?
Listen to this episode of the ITC Tax Podcast for Ed Sullivan’s complete economic breakdown and forward-looking projections for the cement and construction industries.
For strategic guidance on property tax, incentives, and infrastructure-related tax planning, contact ITC Tax for a confidential consultation.