BUILDERS WERE CAUGHT OFF GUARD last month when cement shortages hit south Florida and started spreading to South Carolina, Louisiana, and Texas, states that depend on cement imports shipped from overseas.
Cement imports average 22 percent nationally, but Florida imports 40 percent of its cement, which is why the state was the first to report a problem. The cement shortage is causing anxiety because it is used in everything from foundations to driveways to sidewalks. In some cases, cement is employed in the full construction of a home.
As of mid-May, builders in south Florida reported project delays of up to two to four weeks, and in one case, cement delivery dates were as far off as August. Many anticipate price increases in every economic quarter for the rest of the year, which is unusual for an industry in which price increases happen annually.
“This went from not being on anybody's radar screen to a big problem in less than a month,” says Barry Rutenberg, the Gainesville, Fla., builder who's serving as the point person on the issue for the Florida HBA.
There are at least three reasons for the cement shortage. First, cement demand was flat during the first part of the decade, but as low interest rates caused housing activity to surge, strong economic growth and favorable winter weather conditions created a double-digit cement demand during the fourth quarter of 2003.
Second, the cement industry is heavily dependent on imports, and the number of bulk carrier ships the industry relies on to cover the shortfall between domestic production and consumption has been stagnant at about 5,700 since 1985. The building industry imports other products, such as ceramic tile and aluminum, but they are shipped in containers as opposed to bulk carriers and are not experiencing a shortage of ships.
Finally, China's attempt to build up its infrastructure to prepare for the 2008 Olympic Games has put a strain on the global shipping industry. China's tremendous economic growth has increased the demand in international markets for steel scrap, basic metals, wheat, and cotton. To meet this increased demand, freight flowing to China has increased dramatically over a short period of time.
One potential solution is for the industry to work with the federal government to eliminate the tariff on cement from Mexico. Rep. Mark Foley (R-Fla.) has written a letter to Commerce Secretary Donald Evans asking the government to investigate the issue and report back any potential actions the Department of Commerce could take.