Steel may not be the only construction material in short supply this summer. According to the Portland Cement Association, a fast construction pace in the United States along with a booming Chinese economy has led to a cement shortage in certain parts of the country.
“There are two root causes for the cement shortage,” PCA chief economist Ed Sullivan said. “Global transportation conditions that hinder the flow of imports, and added demand associated with the ongoing U.S. economic recovery.”
PCA suggests the flare in demand arrived after an unusually active winter for construction. Plants traditionally stockpile cement in anticipation for the surge of construction in the spring and summer months. But there was little letup in winter demand, so inventory was not built up.
In Southeastern states such as Florida, which imports 40 percent of its cement, the construction industry has had to wait for shipments from abroad. Because many bulk freight ships are tied up carrying raw goods to China, there aren’t enough ships to meet the demand. There is plenty of cement to meet supply demands, but there is a problem with shipping it to where it is needed.
Many economists are calling the trend the “China Syndrome.” According to Chinese government statistics published by the Washington Post, the country used roughly half world’s cement production in 2003, one-third of the global production of steel, one-fifth of its aluminum and almost one-fourth of its copper.
To transport the raw goods, a massive number of ships are needed. As many as one-fifth of the bulk freighters in the world are currently unavailable on any given day and the cost of moving bulk freight has more than doubled since last year. Ships are lined up for as long as two weeks at ports in Australia, Brazil and India waiting to load up on iron ore to take to China, only to wait three more weeks to unload their cargo once they reach their destination.
The shipping backup isn’t likely to ease any time soon. Freightliner companies have put in large orders for new “Capesize” vessels that can carry as much as 200,000 tons, but it can take one shipyard months to build a single ship. Most Japanese shipyards currently have a backorder of three years on orders for freight ships. The irony of the problem is that more ships are needed for transporting raw materials such as steel and cement, but the ships cannot be produced to meet the demand because there is a shortage of steel.
Nationwide, the temporary cement shortage could affect every sector of the construction industry, ranging from concrete pool installation and road construction to the building of skyscrapers. With the industry already hit by sharp price increases in steel, drywall and lumber costs, some economists say the current increased construction rate in the United States may slow down. For companies in Florida, the shortage in cement already means delays ranging from weeks to months.
How long will the shortage last? According to PCA, the shortages are currently regional, with areas that heavily depend on cement imports being hit the hardest. The short-term solution, PCA suggests, is to import more cement, although this is problematic with the ship shortage. To help meet long-term demands, however, cement companies have announced plans to expand manufacturing capacity in the United States by more than 10 million tons by 2008. According to figures from the U.S. Geological Survey, the U.S. consumed 107.5 million metric tons of cement in 2003.