Last month, I attended NAHB’s midyear meeting in Miami and had the pleasure of sitting in on a presentation by Daniel Swift, president and CEO of Des Moines-based architecture group BSB Design.
Shortages Put Cement Boots on Productivity
Caught short? The best way to minimize the impact of today's shortage is to plan for tomorrow's.
On Aug. 13, as Hurricane Charley was about to slam the Florida coast, Bob Strudler was glued to the Weather Channel. The Houston-based chairman of Miami-based Lennar Homes was more concerned about the storm's impact than on other performance drags, such as the cement shortage that has other builders working shorter weeks.
"It's not that there isn't any concrete; it's just taking longer to get there," he says. "It used to be we could call in the morning for a slab pour. Now we've got to call a week to two weeks in advance." Others, particularly smaller builders with less sophisticated planning methods, haven't been so lucky.
Last year, U.S. demand for cement was 107.5 million metric tons, 23.2 million tons of which were imported, according to the Portland Cement Association. Importers are unable or unwilling to fill the U.S. demand shortfall.
Since the spring, shortages of cement along with gypsum, wallboard, oriented strand board (OSB), steel framing and insulation have driven up builder costs $5,000 to $7,000 for the average new home - not including the cost of construction delays, according to a July NAHB survey. The same survey found that 41 percent of builders reported cement supply shortages, up from 3 percent in March, making cement the most critical shortage nationwide.
By August, at least 29 states were affected, creating shortages particularly strong where supplies rely on imported cement.
"Nobody in my market has run out, as far as I know," says Glenn Webb, sales manager at SB Cox Ready-Mix Inc. and chairman of the Richmond, Va., advisory council of the state's Ready Mixed Concrete Association. "But I've heard of problems in the southern and western part of the states." Keith Beazley, director of industry services for Virginia's state-level association, says allocations are being spread evenly in affected areas, but "small, family-run residential builders seem to be getting hurt more than others."
John Vogstrom, partner in family-owned Vogue Homes, a Minneapolis-area builder, bemoans a local OSB shortage and "skyrocketing prices, but we've had all the concrete we needed so far." His primary supplier, Cemstone of Mendota Heights, Minn., has yet to resort to rationing builder allocations. But Thor Becken, president of Cemstone, says another mild winter or even a delayed barge or cement factory maintenance glitch "could bring some spot shortages in mid- to late fall. There's no excess cement in the market, so there's no room for error."
Under allocation programs, even larger and growing builders can become victims of their own success because "everything's based on what your volume was last year," says Kenneth Felkel, vice president of forward-planning and project development for Century Village Homes of San Bernardino, Calif. The company plans to close 900 homes in California's Inland Empire this year, up more than 150 from 2003, and has been working to stay ahead of the shortage.
When will it end?
Rising interest rates, an early winter and a solution to import shortfalls can end the shortage, but even the experts won't venture a guess as to when it will end. Long-term domestic cement producers have announced plans to add 15 million more tons of domestic capacity by 2010.
Shorter term, the NAHB, Cemex USA and its Monterey, Mexico, parent, are lobbying the Bush administration to ease import restrictions was done with some controversy, for steel importers earlier this year. "If the anti-dumping order against order against Mexico were to be resolved, Cemex and other Mexican producers could help alleviate the cement supply shortage," said Marianne Gooch, Cemex USA spokesperson.
Meanwhile, some builders may find alternatives such as the coal-combustion byproduct fly ash, which can extend, if not replace, cement in concrete. But freeze/thaw performance and availability issues limit its use.
Strudler's advice to builders big and small comes in two words: "advance planning." If supply shortages are as inevitable as the weather, they're also more predictable. The best thing a builder can do today is plan for tomorrow.