No signs of cement shortage improving

Economists can’t see a light at the end of the cement-shortage tunnel, according to recent reports.

In a fact sheet released by Ken Simonson, chief economist for the Associated General Contractors of America, conditions for cement distribution have been problematic since 2003. A strong construction market pushed up consumption by 7 percent in 2004, while domestic production increased only 2 percent, he said in the report.

Consumers didn’t catch the blow until early 2004, said Ed Sullivan, chief economist for the Portland Cement Association, but since then, cement prices have rose by more than 10 percent. Another rise is expected in July. “There will be shortages in 2006 and possibly in 2007,” he said, “even though the shortages tend to subside in the winter when building activity is slow.”

Simonson’s data showed cement demand is barely being met with domestic and foreign production combined. Ninety-five million metric tons of cement were produced last year at 114 plants in 37 states and two plants in Puerto Rico. That was 26 million metric tons shy of the 121 million metric tons used that year.

While some argue the United States should repeal its 80-percent tariff on cement imports from Mexico, which is believed to have cement far in excess of its own domestic demand, others say the answer is to alter laws restricting more domestic production.

“Our shortage is far greater than what Mexico can do,” Sullivan said. “Last year Mexican imports increased 68 percent and we still faced a shortage. The real issue is not getting increased supply – what we really need is increased investment in the United States.”

But Simonson said changing the laws could take time the industry does not have. “Attempts to open, expand or modernize cement plants usually take many years and often get blocked by local or state authorities on zoning, air or water quality grounds,” he said.

“The plants themselves take a long time to build. So the only quick source of relief that we see is to allow imports from Mexico at competitive prices.”

Most cement production laws are put in place because of global climate and environmental issues. Cement, which is used in almost every form of construction, emits arsenic, lead and mercury when burned. “Since local zoning and permitting rules hinder domestic creation, the industry is placed at the mercy of imports,” Sullivan said. And because of the tariff, it costs too much to get Mexican imports, he added.

According to Simonson’s fact sheet, domestic suppliers are acting at full capacity, selling all they can produce by rationing existing customers and turning down new customers.

Contractors and cement suppliers in the following states have reported cement shortages to AGC and PCA: Alabama, Arizona, Colorado, Florida, Idaho, Louisiana, Missouri, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wyoming, Maryland, Georgia, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia.