Pueblo debate on new $200m plant while shortages mount

Pueblo debate on new $200m plant while shortages mount
Published: 25 October 2005

Mexican cement manufacturer GCC is close to investing $200m to build a new plant in Pueblo. It comes at a time when shortages of cement are reportedly delaying construction projects around the state.

If the project gains approval from the board of directors of Grupo Cementos de Chihuahua (GCC), the plant could be operational by the end of 2007, said Enrique Escalante, director of GCC’s US division. The new Pueblo plant would turn out 1Mt of cement a year, making it Colorado’s second-largest cement plant, and help alleviate cement shortages that have plagued Colorado’s building industry for months.

The Pueblo cement plant has been on the table since 1998 and has all the necessary building and air-quality permits. The company is finalizing assessments of electricity supplies, material suppliers and contractor customers, Escalante said. The GCC board is expected to decide by year-end. "We have never been closer and more serious about building the Pueblo plant before," Escalante said.

"Colorado, and specifically Pueblo, make great sense in our business model.... There are few hurdles we have to overcome now, mostly on the cost-of-doing-business side. The most significant is the investment [and] construction cost, the electricity cost and the cost of doing business in the county and the state. I am sure we will soon find positive solutions to these hurdles, so our board will authorize full ground-break before year end."

GCC, which had sales of $348m in 2004, has cement plants in the Mexican state of Chihuahua, and in New Mexico and South Dakota. GCC already has spent more than $22m on site preparation related to the Pueblo cement plant.

A 1Mta cement plant would be a welcome addition to Colorado’s cement supply. The state uses between 2.5Mt to 3Mt of cement a year.

 The state’s largest cement plant, located in Florence and owned by Holcim (US) Inc., was shut down unexpectedly for about five days in late August for maintenance. Holcim’s plant can make about 1.9Mt of cement a year. After the shutdown, Holcim rationed cement to its customers, giving them only 50 per cent of their orders during September. Holcim continued rationing in October, although customers are getting more cement in October than they did in September, Holcim spokesman Tom Chizmadia said. Colorado’s other cement suppliers also have suffered mechanical problems that have limited supplies at a time when demand is strong due to the state’s rising economy.

"All the cement producers are having mechanical problems and they’re working as hard as they can to keep running." said Jerry Schnabel, president of Englewood-based Rocky Mountain Ready-Mix. "I give them a lot of credit to get as much product into the market as possible instead of pointing fingers at each other." The company is a subsidiary of Chicago-based Continental Materials Corp and with sister companies in Pueblo and Colorado Springs, constitute Colorado’s third-largest concrete producer.

The situation is causing problems for projects as large as highway construction and as small as a backyard patio. Work on the $150m COSMIX project to widen 12 miles of Interstate 25 through Colorado Springs has been affected since early July, said Bill Badger, spokesman for Rockrimmon Constructors, the joint venture of the Englewood-based CH2M Hill Cos. Ltd. engineering firm and Sema Constructors construction firm.

 The project remains on time and on budget, but cement suppliers have asked to get two or three weeks’ notice for cement requirements – far more than the typical seven-day advance notice such a project typically offers, Badger said. "We are getting what we need on the larger pours, but we’ve had some difficulty getting a single truckload order," Badger said.

A big question is how public agencies might react to projects missing completion deadlines because of the shortage. Both Denver and Aurora’s public works departments say they won’t impose penalties on contractors who miss deadlines due to the cement shortage. "In a situation like this, when we know this is regionwide and not the fault of a particular contractor, we’ll grant them delays so their schedule can be delayed without penalty, but we don’t pay them any extra [to cover the cost of the delays]," said Stu Williams, director of engineering for Denver’s public works department.

This year’s cement shortage is the worst Darrell Hogan, director of Aurora’s public works department, has ever seen. "There’s less available, period, at any price. It’s not a situation where you can pay a huge premium and get it. It just isn’t available," Hogan said.