A Large Crack Appeared In The Global Market…. And No One Noticed

The global markets were humming right along until a large cracked appeared in 2015.  This big crack in the global economy seemed to go unnoticed, however the implications are quite serious if the trend continues.

Actually, I had no idea how significant this development was until I compared the data to what took place during the financial and economic crash in 2008-2009.

According to the USGS – U.S. Geological Survey, rapidly rising global cement production reached a peak of 4,180 million tons in 2014, and then suddenly declined in 2015:

While a drop of 80 million tons in 2015 isn’t a huge amount, when compared to the data in 2009, it’s a significant trend change.  Let me explain.  The World Bank just revised their figures showing global GDP (Gross Domestic Product) declined 5.7% in 2015:

When they first came out with their figures, the World Bank reported that global GDP declined from $78.4 trillion in 2014 to $73.9 trillion in 2015.  As we can see they revised each figure up by $200 billion, but the overall decrease in GDP was still 5.7%.  Regardless, the interesting thing to focus on is that during the U.S. and Global financial meltdown in 2009, the world GDP fell less in percentage terms at only 5.2%.

Now, if we look at the Global Annual Cement Production chart above, we will see (shown as a RED BAR) that global cement production increased by a stunning 7% in 2009.  Global cement production jumped from 2,850 million tons in 2008 to 3,050 million tons in 2009.  This was mainly due to a large increase in Chinese cement production.

As the chart also shows in the lower right hand side, Chinese cement production accounted for 57% of the world’s total in 2015.  Furthermore, the decline in global cement production was mainly due to a 5% drop of Chinese cement production that year.

The reason for the big drop in global GDP in 2015 and resulting decline in world cement production was due to the 47% collapse in the price of a barrel of oil.  This had a serious impact on the global markets… and still does.  Even though the oil price has risen recently, it declined another 17% in 2016 compared to the previous year.  I would imagine this should impact 2016 global GDP negatively as well.  We will just have to wait and see what the figures turn out to be when the World Bank releases them in the next several months.

So, has global cement production peaked?  That’s a good question.  From the forecasts I have seen, analysts are projecting that global cement production will continue to increase to 4,370 million tons (4.4 billion tons) by 2020.  It will be interesting to see if these forecasts pan out.  However, the propping up of the world stock markets, corporations and governments with money printing and debt is most certainly getting out of hand.

For example, As Wolf Richter stated in his recent article, Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (LOL?):

This relentless and eager focus on Wall Street hocus-pocus explains in part why the DJIA has soared 73% over the five years to 20,000 even as aggregate revenues, despite the delirious acquisition binge, have been mired down in a sea of stagnation.

Okay, now that we are discussing the U.S. Dow Jones Index, what on earth is going on with U.S. cement consumption?  Well, let’s just say, U.S. cement consumption has likely PEAKED a decade ago:

I decided to show U.S. cement consumption rather than just production, because the United States imports a significant amount of cement to meet its demand.  So, focusing on U.S. cement demand provides us a clear picture that something is seriously wrong here.

According to the USGS data, U.S. cement consumption peaked in 2005 at 128 million tons and literally fell off a cliff, by falling to a low of 71 million tons in 2010.  This was a staggering 44% decline in U.S. cement consumption in five years.  Actually the majority of the decline took place between 2006 and 2009.  Thus, in these three years, U.S. cement demand fell by 43%.

Even though U.S. cement consumption has increased to 93 million tons in 2015, this is still down 35 million tons from its high of 128 million tons in 2005.  So, how did U.S. GDP or the Dow Jones Index continue to increase by leaps and bounds, if cement consumption is still 27% below its 2005 peak??

Yes, I would imagine some would say that the United States does not need to grow its cement consumption that much because its infrastructure has been mostly built out.  Well, that may be partly true, but we have to go back all the way to 1997 (nearly 20 years) to equal the same amount of domestic cement consumption reported last year.

I would imagine the huge surge of U.S. cement demand, ending in 2006, was due to the massive housing boom (including strip mall, commercial and warehouse construction) built on the Mortgage Backed Security Ponzi Scheme.

For example, when the country consumed 127.6 million tons of cement in 2006, U.S. GDP was $13.8 trillion.  However, with domestic cement consumption down 27% to 93 million tons in 2015 versus 2006, U.S. GDP surged to $18 trillion.  Something just doesn’t seem to add up… does it??  (GDP source: FRED data)

Well, just as Wolf Richter stated about the Dow Jones “hocus-pocus”, there seems to be a lot of HOT AIR propping up the entire U.S. financial economy.  So, how long can President Trump along with the Fed and member banks continue to prop up the U.S. market that should have died years ago?

If we pay attention to what is taking place in the energy industry, we will find our clue.  I will be putting out an article shortly on THE U.S. MAJOR OIL INDUSTRY CONTINUES TO BLEED TO DEATH.  This should provide an insight on just how bad the situation is becoming in the most vital industry in the U.S. economy.

Without oil, the U.S. and global economy GRINDS TO A HALT… and fast.

Lastly, several of my followers sent me a recent article titled, How I came to Realize I was Wrong About Peak Oil – F. William Engdahl. In the article, Mr Engdahl states the following:

The media said they were told it was because the price of a barrel of oil went way up (due to shortages). I knew that was a lie, and so did others, and radio stations began providing a service where folks could call in locations of gas stations with low prices and they would broadcast the address.

Fortunately, the days when this nonsense can run our lives are in short supply themselves. People are wising up and refusing to buy into the lies.

According to Engdahl, our planet manufactures oil in its core, and replenishes what is extracted by Big Oil. There is no shortage. There never was.

I plan on writing a rebuttal to Mr. Engdahl’s stunning absence of logic, reason and science on this subject matter.  However, I will not be doing this to debate him, rather it will be to provide more information to help answer questions by those who read the SRSrocco Report.

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44 Comments on "A Large Crack Appeared In The Global Market…. And No One Noticed"

  1. Slithereen Guard | February 4, 2017 at 6:20 am | Reply

    it could mean real estate bubble ending

  2. The drop in Chinese consumption of concrete is partly due to the fact that they too, have built out most of their infra structure. They are likely done building ghost cities and pointless roads.

    However, the drop dones parallel the decline in world gdp.

    I live in the outer suburbs around Detroit and the building boom continues at a rapid pace. Much of it us asphalt not concrete. Concrete prices have really gone up in past few years.

    • Eddy,

      You are correct. Concrete prices have declined, but that is not the reason for the large drop off in U.S. cement demand. For example, the unit cost of concrete was $101.50 a ton in 2006, versus $100.50 in 2015. So, the price is not killing demand. Rather it is due to the collapse in real PHYSICAL GROWTH in the United States.

      steve

      • Why is real growth declining? I think we are reaching the point of peak debt exhaustion or saturation. We’ve already brought forward a lot of future consumption…i.e. Cars, education, housing, and credit card debts. What happens next? A huge decline in consumer participation in real estate, retail, retirement? Could be why we are seeing declining retail participation and real estate prices in popular markets like NY and Vancouver. Move over rover deflation could be taking over. Unless, We see wide spread debt foregiveness or bailouts which resets the whole inflationary / debt cycle. What comes next?

  3. Scientists had been surprised to find oil already being produced in the Mount Saint Helen lakes that debris had flowed into a few decades earlier. There is more to learn.

    Canadian oil production from the tarsand fields was said to leave large and deep oily caverns. In the US there are underground coal fires that have been burning perhaps a century. Can science be certain that underground voids such as these will not collect water and sediments that turns to oil faster than is conventionally thought?

    Volcanic ash, water, sediments, and pressure make what, and how quickly? Is it possible people underestimate the natural voids beneath the surface? Science is a process that continually challenges understanding.

  4. From those charts, we have 4,000 million tons world wide. That’s 2.5%.
    I’ve double and triple checked that because the disparity is nuts.
    How much of our GDP comes from financial instrumkents and healthcare and government expendatures supported by petro dollar spending?
    Our percentage of oil consumption is much closer to our GDP % compared to the world. But this too is probably driven by petro dollar power which may be going away soon.

  5. Ugh. < 2.5% of world cement production takes place in US.
    How much more can I butcher this post? 🙂

    • Andrew,

      No worries, I butcher figures all the time. However, I totally understand what you are saying. Amazingly, Chinese cement demand was more in three years than what the U.S. consumed in the entire 20th century. Just think about dem apples.

      steve

  6. Oil is not fossile. That’s for sure.

    The earth is flat, so there is no core. Yes, the earth creates oil abioticly, but at what pace?

    I mean, abiotic oil and peak oil aren’t incompatible per se. The thing is if we consume oil faster than the earth regenerates it, we’re fucked and we’ve got enough peak oil to worry about.

    • I like your comment “Benito”; it is very to the point! I must disagree however; “The earth is round NOT flat” LOL!

    • Please explain how the eclipses happen………

      • IMHO it is flat.

        There’s plenty of experiments you can do to see it’s flat and it doesn’t move.

        The sun and the moon are two objects flying on this flat plane, and the eclipses happen when the moon gets in front of the sun, since they are of the same size, voilà, eclipse!

        You have to forget the notion of an “infinite outer space”. If you think about the earth being flat as a flying disc in the empty space, that’s wrong. Rather, it is most likely an infinite flat plane, with stars, sun and moon revolving around the flat plane (parallel to the plane).

        That is my opinion from my research.

        Now the earth has oil underneath and it is created by the earth. How? I don’t know. But oil would be then a mineral result of something (pressure? heat? IDK).

        But the thing is that all of this is irrellevant. If we extract faster than it replenishes, we got peak oil.

        • I have been to Antarctica three times in summer and believe me the earth is a sphere.
          When navigating at sea if the earth was flat a straight line would be the quickest route but it isn’t, one has to allow for the curvature.
          And the sun in Antarctica never sets in summer with the days lengthening as you go south.

          • Benito Camela | February 6, 2017 at 7:08 am |

            I find it very interesting that you’ve been three times to Antarctica. I wish I could go there as many times.

            That said, I don’t think the reasons you gave debunk a flat earth, though. I’ve been researching the topic for the last 5 years and in my case I’m pretty confident it’s flat.

            I also wanted to add something to a previous comment of mine: The earth being flat doesn’t imply necessarily that oil replenishes. Neither oil being abiotic.

            I’m sure it’s not fossile, but it doesn’t necessarily mean the earth creates it non stop.

            And lastly, I’m not a christian who thinks the earth is flat because the Bible says so. My approach to flat earth is strictly scientific.

          • Benito,

            I gather your theory that the earth is flat goes along the same theory I heard, that the SUN IS FLAT as well.

            steve

          • Benito Camela | February 6, 2017 at 9:36 am |

            Yes, the sun might very well be flat.

            Here’s a good flat earth model animation that shows a 24 hour sun in Antarctica

            https://www.youtube.com/watch?v=1LmwI0Gcl_8

            I’m not saying this is the right model, but it’s pretty good to understand that the polar sun is not enough to prove/disprove the shape of the earth. Actually, there are several different flat earth models. Some say there is no 24 hour Antartic sun, some say there is.

            I have never been to Antarctica, so I’m on the fence regarding the 24 hour sun. Barry says he was there and he saw it. Barry says he’s been there and I have no reason to believe he hasn’t, so I take his claim at face value.

            Some flat earthers believe the earth is an enclosed system, others believe it’s an infinite flat plane. There is no way for me to test those claims, unfortunately. But I’ve spent enought time researching the topic (and doing some experiments on my own) that led me to think it’s flat.

            But if you think Antartica is out of my reach, the sun beats Antartica in that sense 😛

          • Benito Camela | February 6, 2017 at 9:38 am |

            I highly recommend watching this video (it’s chopped in 6 parts)

            https://www.youtube.com/watch?v=MGxiyG9BPR4

            It is not a flat earth video, but it is related, and IMO it is a fascinating explanation.

            Best,

            B

    • Sergio of the Jungle | February 6, 2017 at 2:53 pm | Reply

      My question is if the flat earthers have figured out that the planet is flat, then have they figured out how thick it is?

      • No one knows. The deepest hole ever drilled is 12 km by the russians.

        Ball earthers assume a hot melted iron core. And I’m correct saying assume because there is no empirical proof of that.

        So all I can say is it isn’t thinner than 12 km. How thick it is? IDK.

  7. Not sure where i saw it but the IMF reported something like a 3% gain in 2015 global GDP, same time the world bank reported that 5.7% decline. A staggering 10 point difference. Somebody is full of it. Something has a not so nice smell coming out of the IMF 🙂

  8. The difference between IMF numbers and Worldbank numbers is probably tied to the good old ‘divide and rule’ order. Good cop, bad cop. Let’s see how the opinions roll, and more important, what’s the S&P doing. Is my pension sustainable.

    The cement clause is a rather nice view from the helicopter. One of the many the central banks, IMF, Worldbank, cannot hide. That’s why we have to wait until the emporer comes out of the fiat waters, showing his manhood to the world.

  9. Hi Steve,

    I am new to the metals market, but I have done well. I see 20 trillion in debt and an over priced stock market. I see the economics of this country and world for that matter collapsing in the not so distant future.
    Am I wrong? I do not get the cement thing other than the oil.

    In the 1970’s I saw with my own eyes gas tanker trucks filling abandoned gas stations with gas when there was a supposedly a shortage. I knew right then that this shortage was crap. There is oil. It is all a price game.

    The only thing I care about is gold and silver. What do you see for gold in silver in 2017 as far as price.. I listen to Tom Cloud. He seems to think the market will slide around 24000. Do you agree with him and will gold respond.

    I have also heard a huge bank ( name I cant think of) is short and wants to go long in silver. That bank has to pay off the short before it can go long. that alone should help the silver market? What is your take. Apologies to the really experienced investors. I am new to this, please bear with me

  10. The World Bank data don’t reflect the assertion that World GDP has fallen 5.7% in 2015. Here is the actual data just retrieved from the World Bank website (GDP at market prices (constant 2010 US$ trillion)):

    2007 2008 2009 2010 2011 2012 2013 2014 2015
    62.83 63.99 62.90 65.65 67.69 69.34 71.06 72.97 74.89

    There was no decline in global GDP in 2015 as alleged. Wondering why this data has been misrepresented in your second chart which invalidates other conclusions in your article.

    Thanks,

    Dave

    • Dave,

      Yes, indeed… CONSTANT U.S. DOLLARS. However, inflation is most certainly under-reported by the Central Banks, IMF and World Bank.

      Dave, how the hell did GDP not fall when the price of a barrel of oil declined 47% in 2015??? Come on now, you have to realize the price of oil has been the leading driver in global GDP for the past 100+ years.

      While I understand the CONSTANT DOLLARS is supposed to measure a more realistic GDP figure, because it removes inflation, the GDP DEFLATOR used is faulty indeed. Again, a collapsing oil price has serious impacts on many Middle East, South American and Asian economies.

      Take a look here at the World Bank CURRENT DOLLARS GDP for 2015: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD

      Lastly, GLOBAL TRADE fell a whopping 13% in 2015. There is no way Global Trade plummeted 13% while constant dollar Global GDP increased 2+%. Just insane accounting.

      steve

      • I used the numbers from the world bank website http://databank.worldbank.org/data/reports.aspx?source=2&series=NY.GDP.DEFL.KD.ZG&country=

        Fun with numbers I guess. Only an economist could love that. Constant dollars seem a reasonable estimate measure for an apples to apples comparison and are what I use along with purchasing power parity for GDP.

        If the world had a 5.7% crash in GDP in 2015 that would make headlines I would think so likely some unknown issues with the definition of “current” dollars.

        But I followed your link and that is what it says – however “current” dollars are defined by the world bank. Go figure.

        Dave

        • DisappearingCulture | February 6, 2017 at 3:28 pm | Reply

          “If the world had a 5.7% crash in GDP in 2015 that would make headlines I would think so likely some unknown issues with the definition of “current” dollars.”

          Come on Dave. Do you think there is honesty anymore on a topic like that? The central banks and governments partially function to supress negative headlines about the governments and their economies. It’s bad for business

  11. Steve,
    So we are quickly running out of oil. What is going to happen when it is gone and we have nothing to replace it? What can we do as ordinary people to protect ourselves? Will we revert back to the 1800’s? Our whole economy and lives are dependent upon fossil fuel. We have made some minor inroads with solar and wind power but not enough to power our economy. The fossil fuel industry seems to be desperately trying to hang on and they are not saying that they are running out of oil or working on alternatives.
    People are saying invest in precious metals but I can’t heat my house or run my appliances with gold and silver!

    • DisappearingCulture | February 6, 2017 at 3:39 pm | Reply

      “What is going to happen when it is gone and we have nothing to replace it?”

      Life is going to change a lot and the world’s population will substantially decline. On a macro level that is a brief accurate answer.

      The PM’s are in the hope you will have a store of value/purchasing power better than paper and digits on a screen or monitor saying you own widgets, part of this company or that, or part of the U.S. Government’s debt [bonds], or a company’s debt [corporate or junk bonds].

  12. “I began to question my earlier conviction about peak oil. Months before, a German researcher friend had sent me a paper by a group of Russian geophysicists on something they called “abiotic origins” of hydrocarbons. I had filed it for future reading. Now I opened it and read. I was impressed, to put it mildly.”

    If you read the F. William Engdahl’s article in full, you will see that he quotes Russian geologists having theorised about “abiotic oil” in the 1950’s. That is the basis of his article.

    To the best of my knowledge, Ukraine has been largely pumped out years ago and they are desperately short of gas and oil. So which reality do you want to believe? An American historian/writer who has probably never been to Ukraine or the fact that the USA is conducting wars in multiple countries of the Middle East to ensure control over supply of this precious commodity?

    • Labib Nassim,

      You answered your own question.

      Abiotic oil is complete and utter bullshit.

      F. William Engdahl is a crackpot.

      The era of cheap oil is coming to and end and so is modern society.

      Hope you are prepared.

      • What do you make of this? Kantrowitz turned to the geologist beside him and asked, “Do you really believe that petroleum is a fossil fuel?” The man said,”Certainly” and all four of them joined in. Kantrowitz listened quietly and then said, “The deepest fossil ever found has been at about 16,000 feet below sea level; yet we are getting oil from wells drilled to 30,000 and more. How could fossil fuel get down there? If it was once living matter, it had to be on the surface. If it did turn into petroleum, at or near the surface,how could it ever get to such depths? What is heavier Oil or Water?” Water: so it would go down, not oil. Oil would be on top, if it were “organic” and “lighter.”

        • r sinclair,

          The deepest wells are in excess of 30,000 feet deep (measured depth of 35,055 ft (10,685 m) in the Tiber Oil Field at Keathley Canyon block 102, approximately 250 miles (400 km) southeast of Houston, in 4,132 feet (1,259 m) of water – Wikipedia). The oil got there the same way Mount Everest got where it is. The oil precursors, kerogen, that didn’t manage to get pushed to a deep enough depth didn’t change to oil or tars.

          And yes, oil is lighter than water and in many pockets the oil is on the top and the water is on the bottom.

          It is very straight forward determining that the origin of the carbon in petroleum products is organic and not inorganic as it would be if oil was abiotic.

          SteveW

  13. Nice article Steve, thanks.

  14. Re: the DOW companies report worst revenues since 2010…
    What are the debt levels of the DOW companies?
    Have they increased or decreased with the flat revenues in the past five years?

  15. I have very high regards for your research,
    We read about the plans of Mr Trump spending big on Infrastructure. Will this change anthing?
    Then you have the grand plan of rebuilding the New Silk Route connecting China through Asia into Europe.
    I beleive its a massive plan.
    Have you factored the same?

    • If you are in massive debt and you decide to spend more money, that you haven’t got, on some contruction project or other what is the likey result.?

  16. The oil experts that I befriended when I worked in the middle east in 2002 said that when you see rioting in the streets you know that he EROI is starting to get too low and is affecting the livelihood of people adversely.

  17. I’ll tell you why there is decreased usage of cement in the United States. Many sections of freeways are concrete, and as the states and the country gets poorer, less money is spent on freeway repair, and less cement is used. If roads were repaired / replaced as quickly as they should be, keeping pace with decades past, I think there would not be less cement used these days.

    Steve, what I conclude is that infrastructure… roads and bridges, are not being maintained as they should be, and that reflects less cement usage. I guess that the other main use for cement is in making buildings and factories, and for foundations of houses. I’m not surprised if this category indicates less building going on. The multiple story apartments and condos being built in and around Silicon Valley have the same footprint as the shorter structures they replaced, so allowing for beefier foundations, the structure still requires a lot less cement than several new shorter structures would.

    Also, I’m older and slower now than I was ten years ago. I’ve put off doing the sort of projects around my house that require concrete, mortar, etc. So you can put some of the blame on me !

    Charley Z

  18. I once traveled from California to China, and then continued in an almost straight line to France, then to England, then to New York. I didn’t come across any edges of the earth indicating that it was flat. Maybe I was just lucky. If any reader here knows that he/ she is living near the edge, I want to see some photos so I can be convinced. If I were to fall off the edge, how far would I fall, and how long would my cell phone work? I would start up a bungee business.

    “You go first.”

    • Well, that’s because the flat earth isn’t a coin flying in outer space. It is either an enclosed system or an endless flat plane. You are using the globe model and just trying to switch the globe for a coin, and that’s not the point. The whole cosmology is different. Stars aren’t other worlds, and are very close to earth. The same with the sun and the moon. Way smalled than in the globe model and very close to earth. Earth is a plane, etc. I suggest reading about “Zetetic Astronomy” to get a hint of what I’m saying.

  19. Hi Steve,

    Seems to me that global GDP trend is lagging the contraction in credit. See Hugo Salinas Price’s commentary here:

    http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=304

    Cheers.

  20. Good grief!

    A million (billion) words about energy and not one of them points to reason why the enterprise is failing:

    the inability of the consumption side to offer a return.

    Unless you drive a taxi or a delivery truck (or farm tractor) you can’t pay for the vehicle by driving it ( X 1 billion vehicles). You cannot pay for the fuel or the support infrastructure, either. What pays is debt and lots of it, right now about $200 trillion world-wide. There is no hope for repayment other than taking on more debt to roll over legacy loans as they come due.

    This is the ultimate good money after bad situation. Depletion-driven shortages compound as they make nobody richer; customers cannot borrow to afford products and drillers cannot stay in business b/c they have fewer customers.

    The problem is not in the nation’s oil fields — it will always be possible to wring out a little more crude if one can borrow — but at the end of your driveway.

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