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Cement Shortage Fact Sheet

By Ken Simonson
June 26, 2005
  • Cement, a powder derived from limestone, is an essential ingredient in producing ready-mix concrete, concrete block, and mortar. Concrete is used for residential foundations, building walls supports, parking structures, roads and bridges, and as a homebuilding material in hurricane-prone areas.

  • Cement is produced in many locations. In 2004, about 95 million metric tons of cement were produced at 114 plants in 37 states and two plants in Puerto Rico.

  • However, domestic production falls far short of demand. Total consumption amounted to roughly 121 million metric tons. The excess of demand over domestic production was met from imports (approximately 23 million metric tons) and drawing down of inventories (4 million tons), typically built from prior-year imports. Together, these sources accounted for some 23% of consumption.

  • A strong construction market pushed up consumption by 7% in 2004, while domestic production increased only 2%. It has been difficult to get zoning and environmental permits to expand production in the U.S. The share of consumption supplied by domestic production fell to 77% in 2004 from approximately 80% in each of the three prior years.

  • Typically, cement supplies are built up during the winter, because concrete cannot be poured in northern states in freezing temperatures or when the ground is covered. As the warm-weather “cement-pouring season” progresses, inventories are drawn down.

  • In 2004, the Portland Cement Association (PCA) published three surveys on cement shortages. PCA reported shortages or tight supplies of cement in all of parts of 23 states in June, 28 in August, and 35 in November.

  • In the first four months of 2005, the value of construction put in place was 9% higher than in January-April 2004, implying further strong growth in demand for cement. Reports to PCA and Associated General Contractors of America (AGC) as of early June showed parts of 25 states in short supply, including several that had no shortages in 2004, or not until later in the year. Contractors and concrete suppliers told AGC that concrete deliveries were being cut to four days a week from five or six due to lack of cement.

  • Cement is very expensive to transport by truck. Therefore, areas without ready access to a local cement plant, rail line or port are more likely to run out of cement, particularly if ports or railroads are congested.

  • The U.S. imports cement from more than 30 countries. In 2004, the leading suppliers were Canada, 21%; Thailand, 11%; Venezuela, 9%; China, Greece, and Colombia, 7% each.

  • Only 5% of imports came from Mexico, although Mexico is believed to have capacity far in excess of its domestic demand. Data on cement imports for 38 customs districts by country of origin show that the largest imports came through New Orleans, Tampa, Los Angeles, and Miami. All of these ports are readily accessible from Mexico, but their combined imports of Mexican cement in 2004 totaled 0.

  • Imports of Mexican cement are small because it is subject to an “antidumping duty”-essentially a tax of up to 80%. The Commerce Department has imposed the duty since 1990 after a group of U.S. producers, organized as the Southern Tier Cement Coalition, complained that the Mexican firm Cemex was selling cement for less in the U.S. than in its home market. Cemex has protested the duty in a variety of administrative and judicial forums, and the rate has varied over the years, but the duty remains.

  • On June 3, AGC's CEO, Stephen Sandherr, wrote to Commerce Secretary Carlos Gutierrez, asking him to work with domestic suppliers to allow a suspension of the duty. Currently, domestic suppliers are selling all they can produce, rationing existing customers (even their own subsidiaries that sell ready-mix concrete), and turning down new customers, so it does not appear they would be “injured” by suspending the duty.

  • Allowing Mexican cement into the U.S. at market prices would directly relieve some of the severest shortages, which are in areas close to Mexico, such as Florida, Arizona, southern Nevada, and parts of California. Once these areas could rely on barge or rail deliveries from Mexico, they would make additional U.S. supplies and ocean ships available to provide cement to other regions.

  • The producer price indexes for cement and concrete products both rose more than 10% from May 2004 to May 2005. Similar increases have been announced for July. Without Mexican cement, shortages and price increases appear certain to get more extreme.

    Updated 6/22/05 by Ken Simonson, Chief Economist, AGC, simonsonk@agc.org, 703-837-5313

    Sources: AGC, PCA, U.S. Geological Survey, Bureau of Labor Statistics

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    Chief Economist, Associated General Contractors of America 703-837-5313; fax -5406; www.agc.org

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