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Construction Materials in Short Supply

As the construction season heats up for the summer, the economy improves and slow construction starts begin to turn around, report s are indicating possible cement shortages. In Florida, ready mix companies are on four-day-a-week allocations and California and other U.S. markets are also on or headed toward allocations. The domino effect is that demand is passed outside markets to meet local demand, creating shortages in other local markets.

Several factors converged to create tight supplies of cement, the key ingredient in concrete, and Minnesota will not escape the impact during the 2004 construction season. Strong construction markets exist in the U.S. and overseas. Construction spending reached an all time high in March 2004 according to the U.S. Department of Commerce. An unusually active winter for construction in the U.S. left little opportunity to build a strong inventory for spring when construction activity traditionally increases.

The short-term solution used to meet our local supply needs is to import foreign cement. In the past several years, approximately 25% of the cement consumed in Minnesota came from overseas. We are not alone. According to figures from the U.S. Geological Survey, 2003 U.S. Portland cement consumption was 107.5 million metric tons. Of that total, 23.2 million tons or 22.6 percent was imported cement.

The booming Asian economies have let to an increased local demand for the foreign-produced cement that was filling the gap in our domestic production. In addition, the demand for all consumer good in Asia and other parts of the world has put a strain on the availability of transport ships and caused shipping rates to escalate. These factors have caused imported cement to become more expensive and difficult to acquire.

The length and severity of the shortages of cement in the U.S. depends on the region and on the cement companies serving that region. To me the increased demand, cement companies plan to expand manufacturing capacity totaling more that 15 million tons between 2003 and 2010. Zoning laws, permits activity, and regulatory roadblocks have long been a problem for heavy industries such as cement and will continue to limit the actual realized amount of expansion.

While there is guarantee of market certainty, some analysts are predicting further volatility throughout the year as seasonal cycles for construction continue. The fluctuating price of raw materials has resulted in a commercially impractical situation where suppliers of raw materials cannot reliably anticipate materials costs. However, it should also be noted that the price of concrete products has been and will continue to be among the most stable of all construction products.

The goal of the ready mix industry is to serve the state of Minnesota with an adequate and steady supply of concrete. Local ready mix concrete producers will continue to be the best source of information for current market conditions and its impact on concrete supplies.

For more information, please call Fred Corrigan, Executive director, Aggregate & Ready Mix Association of Minnesota at 952-707-1250.

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