Gambling on more cement

Gambling on more cement
Published: 10 May 2004

A shortage of cement is leaving many in the construction industry concerned that it could slow down Southern Nevada’s explosive growth. Just since January, local ready mix companies are reporting that the price per ton for cement powder has been increased twice, with another increase expected June 1. Ready mix companies in Nevada have now been put on an allocation schedule for cement. "I’ve been in this business for twenty-seven years and I have never seen anything like this," says Bob Albano, vice president of the Nevada region for Florida-based ready mix company Rinker Materials. "We’ve had three announced [price] increases from January to the summer and freight increases on top of that. These were significant increases. There are several of our competitors that ran out and we are on an allocation, day-to day."

The cement shortage is already causing some builders to change their construction plans. The Massachusetts-based commercial developer Perini Building Company, Inc. is preparing for a long, hot summer with not enough concrete. "Right now, it hasn’t affected how we are building, but it is expected to curtail the way we are building in thirty days," says Dennis Weese, Perini’s structural coordinator for its western office in Phoenix. "By June 1, the cement shortage will be so bad that we’ll have to cut back. It will be the worst shortage since the late 1970s."

The price for cement  is up as much as 25 to 30 percent, according to those in the industry. "I believe it was in the mid-sixties [dollars in range]. Now it is in the mid- to low-nineties. It has probably gone up twenty-five percent in the last few months," says Rich Warren, the executive director of the Southern Nevada Concrete and Aggregate Association. The association had six of the dozen or so ready mix firms as members. Southern Nevada is also home to a number of smaller mobile mix companies that go on site to mix cement power with water and other ingredients to make concrete.

While Warren now says he’s confident the industry can now work together to make the best of a bad situation, he says two companies were forced to shut down temporarily because they didn’t have any cement. Rinker’s Albano has seen the price of cement rise 30 per cent since the beginning of the year, and now has to also ration supplies to its customers. "In Las Vegas, there is certainly room for concern in that you have ready mix companies allocating to customers," he says. "We take care of our loyal customers first. We are not going after new customers and we are not accepting new customers."

Southern Nevada’s cement is brought in from Southern California, Utah and, sometimes, Oregon. Some of that cement has been imported to California from overseas. Warren says the cement shortage is being caused by a perfect storm of events, including a decrease in imports from Pacific Rim countries in Asia, booming economies worldwide, power problems in California, increased shipping costs and problems with delays on the railroads. Part of the problem is that the Pacific Rim nations of China and Thailand produce a huge amount of the world’s cement, but are now using more of it at home as opposed to exporting it, he explains.

California shipped 9.4Mt of cement to Arizona, Nevada and to areas within Southern California, with the southern part of the Golden State using most of that, according to Warren.
To make matters worse, he adds that the cement plants in California recently were ordered to shut down by the power companies there, for as much as 12 to 24 hours at time, because of the that state’s energy crisis. That reduced output even further.

The problems aren’t limited to those ready mix firms that get their cement powder to California, either. Locally-based All-Star Transit Mix was forced to shut down for a day because they didn’t have any cement even though normally they get their supply shipped in from a cement producer in Utah. A problem with the Union Pacific Railroad line caused the delay, according to Rick Justice, the sales manager for All-Star. "That probably cost us two hundred thousand dollars, or even a quarter of a million dollars in revenue," he says. "I’ve been in business for twenty-six years, and this is the first time I’ve seen business shut down for a day."

All-Star’s cement supplier, Kansas-based Ash Grove, says its problems in delivery stem from Union Pacific Railroad’s shortage of staff. UP was faced with an unanticipated demand on the rail lines, according to Lance Latham, director of community affairs for Ash Grove. Latham says Ash Grove charges around $80 per ton of cement, which is about a 5 per cent increase this year. Ash Grove’s Las Vegas terminal has about 11,000t of capacity, he adds.

Even some of the smallest operators are feeling the pinch in Southern Nevada. "We are actually experiencing a situation where the cement companies are deciding which companies to supply and which companies not to supply, and, in turn, the concrete companies," says Brant Morris, the president and owner of Campbell Mobile Mix in Las Vegas since 1998.
He contends the fast-growing western cities of Phoenix and Las Vegas are traditionally the largest cement users and, "They’ll be the hardest hit."

The Portland Cement Association, the industry’s lobbying group, disagrees with that assessment. "The shortage is worse is some cities in the southeast, but I’ve heard chatter from Southern Nevada," says Ryan Puckett, manager of media relations. "It’s nationwide, but it fluctuates widely," he adds.  Back in Southern Nevada, MSI Concrete general manger Michael Saladen is holding out hope it will get better. "I’ve had times when I try to buy, but I’ve had to wait," he says. "It will definitely affect building, but I hope we have a resolution soon."  (original report taken from the Las Vegas Business Press).