Home builders doing business in Florida—where cement supplies are among the tightest in the country—welcomed news that the state's Department of Environmental Protection approved a 37 percent increase in the production of clinker at Titan America's Pennsuco cement plant. That's significant because the plant, which is the largest in the state, produces close to 20 percent of the 10 million tons of cement Florida uses in a year.

The plant capacity will increase to about 2.5 million tons a year. “I think the additional capacity will help to ease the pressures of a tight market,” says Tim Kuebler, vice president of sales at Titan America.

Clinker, in fact, is key to increasing cement production in the United States. “To the extent that we had any increase in U.S. production in cement last year, it came from imported clinker,” says NAHB economist Michael Carliner. “We didn't have enough clinker to feed the grinding mills, and so [the increased plant capacity] will mean less reliance on imported clinker. But Florida will still be heavily dependent on imports.”

Half a million tons of new capacity “is fairly significant,” Kuebler says. Still, the most important variable to watch, he cautions, is demand. “If [demand] goes to 11 million tons, you've just kept your nose above water,” he says.

Eleven million tons could happen. Carliner points out that the soft commercial building market has kept the supply strain at bay for many materials during the recent years of record home building activity. But as nonresidential building activity picks up, the supply for products that are used heavily on the commercial side may be strained.

Meanwhile, cement users received more good news in January, albeit more in the form of a moral victory than in being able to get their hands on more cement in the short-term. The U.S. and Mexican governments agreed to phase out U.S. duties on cement imported from Mexico during a three-year transition period ending in 2009. The agreement, which puts to rest a 16-year trade dispute between the two countries, allows for only about an additional 1 million tons of Mexican cement to come into the U.S. this year.

But perhaps more importantly for the short term, the agreement allows for more cement to be brought in from Mexico in the event of natural disasters (read: hurricanes) that severely strain the supply.

Pennsuco, Fla. Plant SOURCE: BIG BUILDER RESEARCH 2005