Building boom causes shortage, price hike
By ROBERT TRIGAUX
Published June 8, 2005
We use a whole lot of it and show little likelihood of cutting back soon.
We rely more and more on foreign imports to meet our insatiable demand for it.
"It" isn't oil. In this case, our unquenchable need is for something different.
Cement.
Florida's construction boom and condominium craze, hurricane-inspired building codes, a growing population and the state's high dependence on imported cement have combined to put a major squeeze on the supply of a basic building product very much in demand. The result has been delivery delays and sharply rising construction costs.
"It's greatly affecting the costs in our industry," says Sam Ellison of Tampa's Beck Group, whose firm handles major construction projects in the area. "Owners are having to raise their budgets to accommodate these increases, or they are making adjustments in other elements of the projects, such as (reducing) the finishes and amenities to help offset these material cost hikes."
Ellison estimates the cost of a cubic yard of concrete (which is made with cement) has increased about 45 percent since late 2003. He expects a 14 percent increase before 2006. Those double-digit expenses are inevitably passed on to the buyers.
Complaints over hard-to-get, higher-price cement are not new. But they are getting more intense. Especially in Florida, where record home construction and larger-scale construction of hotels (with parking garages) and public projects (especially bridges) are increasing the clamor for more cement.
Tight supplies are primarily the result of record demand for cement, says a new report from the Portland Cement Association, the nation's trade group for the cement industry.
Cement consumption in the United States grew to 119.9-million metric tons in 2004. That's up 6.8 percent over 2003, which had been a record year for cement consumption. Through the first quarter of 2005, U.S. cement consumption increased 7 percent over very strong 2004 levels, the report says.
Among the states, 23 report various levels of supply difficulties. But three - Florida, California and Texas - are the leaders in trying to meet the demand for cement, says Ed Sullivan, Portland Cement Association chief economist.
Last year, Florida used 9.5-million tons of cement, while producing just 5.5-million within its borders.
The cement shortage is caused by a litany of factors, Sullivan says. U.S. cement factories are maxed out, producing as much as they can. But the industry finds it hard to find locations in the country to build plants.
"For some reason, no one wants a cement plant in their back yard," says Ken Simonson of the Associated General Contractors of America. The group received recent reports from contractors and concrete suppliers documenting quotas, delays and possible layoffs because of cement shortages in Florida, Washington, Oregon, Idaho, Nevada, Utah, Wyoming, Oklahoma, Texas and Missouri.
The trade group last week called the cement shortage "dire" and asked Commerce Secretary Carlos Gutierrez to suspend a 15-year-old, $33-per-ton tariff on cement from Mexico. Quick action seems unlikely.
Rising demand for imported cement is hampered not only by the availability of foreign cement but by the lack of room on bulk-carrier ships to haul the cement to the United States.
"We woke up in 2003, and realized it was a different world," Sullivan says. "There are billions of people in China and India who can can exert tremendous demand on world resources." The rebuilding after December's tsunami in Southeast Asia also diverted cement resources.
Because of its location and high demand, Florida depends on 40 percent of its cement to be shipped from overseas producers, Sullivan says.
Nationwide, imported cement will count for a record 25.3 percent of the U.S. supply in 2005, Sullivan projects. That's up from 20.7 percent in 2003.
The bad news is Florida and a few other states face the harshest conditions. Worse, the reports of shortages in May reflect conditions prior to the onset of heavier construction activity.
In Florida, the forecast calls for continued demand for cement, with little easing until 2010 when new domestic production comes online. Until then, look for construction costs in general to rise.
It's not as if housing prices in the Sunshine State need more encouragement to soar.
Robert Trigaux can be reached at trigaux@sptimes.com or 727 893-8405.