No Cement Shortage Here

February 13, 2006
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GRAND RAPIDS — Cement shortages in the United States have pushed the U.S. Commerce Department and Mexico toward resolution of a long-fought battle over U.S. duties on Mexican cement.

The two countries reached a tentative deal last month that would permit Mexico to export 3 million metric tons of cement to the United States annually, up from the 2-million-ton limit of last year. The proposed three-year settlement, which has yet to be finalized, also would slash U.S. import duties on Mexican cement from $26 to $3 per metric ton.

“The agreement is a positive step toward resolving a 16-year dispute between the U.S. and Mexico,” said U.S. Commerce Secretary Carlos M. Gutierrez upon announcing the negotiation. He said the agreement will help ensure that Gulf Coast communities have the resources to rebuild and will also help U.S. cement producers access the Mexican market.

The Associated General Contractors of America estimates that America uses 130 million tons of cement, of which U.S. firms are able to supply 95 million tons. According to AGC, cement shortages peaked in 32 states last summer. But it doesn’t appear that Michigan was one of them.

John Doherty, executive vice president of the Associated Builders and Contractors, Western Michigan Chapter, said he doesn’t sense that cement shortages have been a problem in this area, but said he has heard talk about the rising price of cement.

Similarly, Aaron Kitson, vice president of Lee Kitson Builders, hasn’t heard complaints among home builders about cement shortages. Builders in this area are more affected by the price of cement than anything else, he said.

“Concrete, especially through 2005, did jump in price quite a bit. We ourselves are not experiencing any trouble getting cement; we’re just paying more for it. But I have talked to other builders around the country that just flat out have trouble getting it,” he said. He thinks part of the reason is that the Grand Rapids market is a little “cooler” than a lot of the other housing markets around the country so it hasn’t experienced shortage or delays in getting it delivered.

“I think the demand for cement is just because, nationally, we’ve been on a pretty fantastic ride in housing. The demand for housing has been huge across the country over several years. Certainly, things like Hurricane Katrina contribute to demand, but I think the biggest factor in the shortage and the price increase is just that the housing market is just going gangbusters.”

Bill Roersma, owner of Roersma and Wurn Builders Inc., said his company hasn’t had any difficulty obtaining cement for projects up to this point, and he hasn’t heard a lot of people complaining about a limited supply in West Michigan. Roersma, who serves on the National Association of Home Builders Economic Council, said cement shortages are a problem on a national level, however.

“It’s becoming a big problem in the hurricane areas and out in California,” he noted “Here, we haven’t felt it yet. I pour my walls through a company that does around 15 to 20 percent of the home starts in Grand Rapids, and they have not complained thus far. Maybe the smaller companies have been affected but I haven’t heard that.”

Reg Klooster, general manager of Grand Rapids Gravel, said a year or so ago the cement supply was a little tight, but there appears to be plenty of cement available right now. Grand Rapids Gravel serves greater Grand Rapids, Holland and Muskegon and is the area’s largest supplier of ready mix gravel. Klooster has heard some complaining about cement prices, but he said that’s to be expected anytime the price of anything goes up.

“I think everybody realizes that the cost of doing business today has gone up,” Klooster said. “Our cement prices have increased — there’s no doubt about that. Not everybody is happy with that, but we’re not happy with the gas prices either, or the price of steel or lumber.”

Klooster said West Michigan and Eastern Michigan aren’t all that busy anyway, so builders and general contractors aren’t burning up the cement like they would normally. Grand Rapids, however, looks like it will use up a significant supply of cement this year, he said. He’s sure that a good deal of the country’s cement supply will be headed to the Gulf Coast region this year.

“The cement producers, if they have excess, they’re going to ship it where they can use it,” he commented. “But I don’t think you’ll see a problem with cement shortages in the state of Michigan.”

The national ABC organization applauded the duty reduction on Mexican cement and has asked the Commerce Department to eventually eliminate the cement duty altogether, particularly for the benefit of companies working on hurricane recovery efforts.

“Our nation’s continued construction boom has driven concrete material prices up very quickly, and that was even before the hurricane season,” said Jack Darnall, national chairman for ABC. “This tariff relief will help soften those price spikes and benefit customers, many of whom face rising construction costs so dramatic they threaten the viability of their projects.”

Stephen Sandherr, CEO of the Association of Builders and Contractors, added that the new trade agreement does not pose a threat to domestic cement makers, saying that “… an extra million or so from Mexico will not harm U.S. firms. Instead, the agreement will shorten delivery times compared to the weeks it takes to bring cement across the ocean and through congested ports and rail lines.”

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