Cement caravan fails to hit the pavement

Cement caravan fails to hit the pavement
07 September 2005

When Albuquerque Mayor Martin Chavez announced in mid-August that he and Chihuahua, Mexico Mayor Juan Blanco had worked a deal to avert a cement shortage crisis in New Mexico, he said a "caravan" of trucks loaded with powdered cement soon would be barreling up I-25 from Mexico.

Because of the deal in which the state’s largest cement supplier had agreed to cut supplies by 10 per cent instead of 20 per cent, New Mexico had avoided a "body blow" to its construction-fueled economy, Chavez said.

But now, three weeks later, New Mexico contractors and concrete producers are wondering if the caravan that Chavez mentioned got lost. Or if the mayors weren’t fudging on their numbers in order to make the situation seem better than it was. Contractors and concrete producers in Albuquerque and Santa Fe say they’re facing concrete and cement shortages in the 40 to 50 per cent range, as well as hefty price increases. They say they see no end in sight to the shortage and that it will cause small contractors and concrete suppliers to go out of business.

The contractors and suppliers say when Chavez announced the end of the crisis, he failed to mention that the 10 per cent reduction was based on average cement consumption for the first six months of the year, and not the entire year. That period includes months in which cement consumption is at its lowest.

Compared to the amount of cement contractors usually use in the summer construction season, the cuts are actually much worse than 10 per cent, they say.

"Suppliers are seeing decreases of 50 per cent, and we’re now paying US$105 a cubic yard for concrete when just a few weeks ago we were paying US$65," says Doug McDowell, owner of McDowell Construction in Santa Fe. "Now I’m told that I’ll need four weeks to get a load of concrete. Typically, I could get one in two days."

McDowell, who builds custom homes in Santa Fe, says the shortage and the price increases have caused him to make an US$8000 change order on a home he’s building in Santa Fe. His company employs 25, does about US$3m a year in sales and will probably survive the cement shortage, but smaller contractors might not make it, he says.

"I can just see what is going to happen to some of these small guys. I think many of them are going to go out of business," McDowell says.

Leif Yderstad, general manager of Lafrage Concrete and Block in Albuquerque, says his company’s supply of cement has been reduced by 40 per cent over what it was last August. His concrete trucks are running four days a week, when they normally run five and a half, and he says that Chavez and Blanco didn’t tell the full story about the numbers they were using when they announced their deal to alleviate the shortage.

"It’s a bit misleading to the public. The original 20 per cent reduction was based on the average (consumption) for the first half of the year. That includes January, February and March, when people don’t pour a lot of concrete," Yderstad says. "In reality, month over month, we’ve got 40 per cent less than we had in August of 2004. I don’t know if the governor and the mayors understood that."

Don Power, president and CEO of Jaynes Corp., agrees with Yderstad’s comments. "The mayor and the governor said something that is not totally wrong, but it is not right, either," Power says. "They took an average that includes the first six months of the year, instead of taking a full year of cement (consumption). There are a lot of smaller companies that are not going to get concrete and that is going to affect their businesses dramatically."

Albuquerque contractors are seeing a 30 to 40 per cent reduction in their concrete supplies, Power says.

The mayors did understand that they were basing shortage and supply calculations on the first six months of the year, but the mayors were merely working off numbers that Cementos de Chihuahua officials had developed, says Fred Mondragon, director of the city of Albuquerque’s Office of Economic Development.

"We didn’t do it. The company came in unilaterally and said they would be based on the past six months," Mondragon said.

But so far, even the promise of keeping cement supplies at 90 per cent of their winter and spring levels is falling short. Mondragon says that’s because the cement has yet to flow from plants in Mexico owned by Cementos de Chihuahua. Rather than sending the cement in trucks, the company, which owns a cement plant in Tijeras Canyon east of Albuquerque, is looking to send it by train, Mondragon says.

"The cement has not yet started flowing. It will probably be the middle of next week before it starts flowing," Mondragon said on August 26. "They are going to ship it by rail and they have been in the process during the past week of assembling rail cars. They’re bringing in cars from Texas, New Mexico and Colorado. They did not want to ship one or two rail cars at a time.

"We’re talking about bringing the supply up to 100 per cent based on consumption in the first six months of the year," Mondragon says. Exactly how that will affect the overall yearly supply remains unclear. Jeff Lattanza, area manager for the Lafarge concrete operation in Santa Fe, says his supplies have been cut by more than half. His plant normally gets 17 loads of cement a week. Now, however, it is down to six.

"If I could get 100 per cent of the first six months, I’d be fine," Lattanza says. "But I’ve been getting six loads a week and I’ve been told to be prepared to go all the way to the end of the year with that."

Published under Cement News