Video: A concrete problem

By Rob Reynolds Washington correspondent
CNBC
updated 6/15/2005 3:34:46 PM ET 2005-06-15T19:34:46

On a job site in Spokane, Wash., workers from Champion Concrete Pumping pour the foundations of another new home — part of a housing and construction boom in this part of the Pacific Northwest.

But there’s a big problem: not nearly enough cement. Fifteen percent less than last year, in fact, and demand for it is up 30 percent.

“It has definitely had an impact on out bottom line,” said Champion President Dave Bertsch. “If it continues, we are going to have some layoffs, we are going to have to liquidate some equipment … it’s a domino effect.”

Across town, at concrete firm Spokane Rock Products, manager Steve Robinson has to ration supplies to his customers.

“We are not able to get the amount of portland cement we need to produce the Readi-Mix concrete necessary for supplying our customer demand,” Robinson said. “It’s impacting both the home-building market and the commercial building market — every use of concrete,” he said.

The red-hot real estate market shows no sign of cooling, but a shortage of cement — a humble, but irreplaceable, material — could slow the growth of new housing.

The cement shortage is putting a crimp in construction nationwide according to homebuilders and contractors’ trade associations.

“If you get into a situation where projects are going to be delayed and people are out of work, that’s a significant blow to the economy,” said Stephen Sandherr, CEO of the Association of General Contractors.

With the heavy construction season just getting underway, contractors in 10 U.S. states are reporting severe cement shortages: Washington, Oregon, Idaho, Nevada, Utah, Wyoming, Oklahoma, Texas, Missouri and Florida.

Behind the scarcity: heavy demand, transportation bottlenecks and a shortage of shipping. There are global factors too. Twenty-five percent of U.S. cement is imported from abroad, with Thailand one of the biggest suppliers.

But this year, Thai cement is being used to rebuild areas Southeast Asia ravaged by last December’s tsunami disaster. And China is absorbing large amounts of cement for its own construction projects, including arenas for the Beijing Olympics in 2008.

Warning of increasingly dire shortages, U.S. contractors want the government to intervene. They’ve asked the Commerce Department to boost supplies by lifting heavy anti-dumping tariffs on cement imported from Mexico.

“We would like to see [the government] put some pressure on the domestic producers to allow, on a temporary basis, Mexican cement, and cement from other sources, to enter the United States,” said Sandherr.

But the cement shortage is actually good news for U.S. cement companies like Cemex, the largest U.S. player, Lafarge North America, Florida Rock Industries and Eagle Materials notes Jack Kasprzak, managing director and research analyst with BB&T Capital Markets.

“It keeps their plants running at near 100 percent capacity and helps pass through price increases, and that benefits their earnings of course,” Kasprzak said.

Still, despite the bullish outlook for U.S. cement companies, analysts warn that building materials stocks could be vulnerable later this year if residential construction slows.

© 2012 CNBC, Inc. All Rights Reserved

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