Second round of US cement price increases in 2005 announced

Second round of US cement price increases in 2005 announced
Published: 14 December 2004

Holcim has just announced a second series of price increases for 2005, scheduled to take effect in July, or in some cases on the 1st of August, following an earlier round of price increases from January, ranging from US$5 to US$9 per short ton, depending on the area.  The level of the second round of 2005 price increases has been announced at US$5 per short ton, essentially across the whole of the United States, where Holcim sells cement, either through Holcim US or through its Canadian arm St. Lawrence Cement.  This shows the determination of the North American cement producers to take advantage of the tight supply situation of pass on higher operating costs, notably higher energy prices, to the customers.

 In 2004, most US regions saw two price increases, some even three, resulting from a combination of cost increases and supply shortages.  The supply problems were the worst in Florida, where plant failures in combination with a shortage in shipping capacity let to cement being put on allocation for a period.  The price increases introduced have generally stuck, giving cement prices in excess of US$80 in Florida at the end of November, more than US$6 per short ton higher than in the late summer, in spite of an addition to local production capacity, amounting to around 0.8m tonnes having become available during the summer, with the completion of the modernisation and up-grading of Titan’s Pennsuco works.  However, when looking at the price developments during 2004, it must be borne in mind that pricing ended 2003 on a weak note in many areas.

Eagle Materials, which produces and sells cement in Illinois. Nevada, Wyoming and Texas, reported an average price for the July to September quarter 5.1 per cent higher at US$70.05 per short ton when compared with the same period in 2003, when it stood at US$66.64, only to drop to US$65.72 in the final quarter of that calendar year.

Buzzi Unicem’s RC Lonestar increased prices by US$3 per short ton last spring and by a further US$3 to US$5 in August, with both series of price increases sticking.  On a similar note, Cemex reported its average US cement price up by 7 per cent in the third quarter and by 3% for the first nine months, while in the final quarter of 2003, there had been a 1 per cent decline. Lafarge North America, which is active both in the United States and in Canada, saw its third quarter prices 3 per cent higher than the same period last year.  However, looking at the United States in isolation, the increase was nearly 4 per cent and the September average price was US$4.10 higher that the, weak, fourth quarter of 2003, following the success of the price increases in April and in August.

 With cement price increases announced more or less across the board from January, 2005, most of the major ready-mixed concrete producers have also announced higher prices from January, but some of the smaller independent ready-mixed concrete companies look set to wait until March, with in the northern parts is not going to make much difference, but could squeeze margins elsewhere.