Got cement? As of July, contractors are still saying, “No!”
Strong demand and international demand for space on cargo ships have combined to create a concrete shortage in regions throughout the United States. And the crisis shows no signs of abating soon.
The Associated General Contractors of America is forecasting huge price increases, citing a report from the Precast Consulting Services Management Bulletin that predicts cement prices will jump by as much as 15 percent to 20 percent over the next few months. “Cement shortages and unexpected higher prices have the effect of delaying construction projects and adding to the cost of those
projects,” says AGC president James D. Waltze.
Robust residential construction is driving the cement shortage, according to a report issued in June by the Portland Cement Association. Shortfalls have cropped up in 23 states in the Southeast,
Southwest, New England and Northern Plains. The shortage was first reported in Florida, and California and New York are also affected.
Ed Sullivan, chief economist for the Portland Cement Association, says the crisis may well extend into the fourth quarter of 2004. “I don’t think anyone knows how long it’s going to take,” he says.
Several factors could bring relief as the year wears on, Sullivan says. For one, rising interest rates could ease demand for cement from the residential sector. “I think residential demand is going to cool off in the second half of this year,” he says, “but a lot of people don’t agree with me.”
Also, China’s net export rate may slow, freeing up ship space for cement orders to the States. Chinese officials are scrambling to curb their country’s economic growth to keep its economy from
overheating, Sullivan says. “They are really concerned about inflation.”
Freight rates have recently dropped, he notes, which may be a good sign. But will the drop be sustained? He doesn’t know. And he knows of no plans to put more ships in the water to ease the crunch.
Meanwhile, contractors have to face wait times, Sullivan says. Big orders, such as for public works projects, are prioritized while residential contractors get pushed aside, he says. He’s heard stories of
jobs put on hold for days or even weeks.
Janine Flynn, COO of SuperStone Inc., a Florida-based manufacturer of concrete products, says her company is stockpiling cement. “A lot of local companies use the same concrete company,” she says. “So what they’re doing is giving the concrete company a schedule a month in advance, and they’re not having any problems.”
Companies who do small-volume business with concrete suppliers are hurting, she says. “Concrete companies are not going to supply anybody new, while regular customers are being taken care of,” she says.
A big contractor can coordinate an order far ahead of time with its ready-mix supplier, agrees Sullivan. “But for small guys working with small volumes, I really don’t know what they can do.”
Well, actually, he does have one idea. “Make sure you have a good relationship with your ready-mix supplier,” he says. “I know some ready-mix people who say, ‘If we pull teeth to get the bill, you’ve got to wait in line.’ Another guy — ordering the same volume, but pays the bill on time — moves to the front of the line.”