|Source: Portland Cement Association|
As they place bids for this summers work, U.S. contractors are becoming alarmed by unexpected and historically high price increases in the cement and concrete marketplace. "We got hit over the head with steel prices and worked through it, but this ready-mix thing blindsided us," says Clay Fischer, president of Woodland Construction Co. Inc., Jupiter, Fla. In south Florida, ready-mix prices are up $8 to $10 per cu yd since January and suppliers have announced another $5 increase effective July 1, he says.
On top of the price hikes, shortages are popping up, making availability an issue in some areas. Form Works Inc., a Fort Lauderdale-based construction firm pinched by short supplies in recent weeks, has lost 10 to 15 days of concrete work over the last six weeks due to irregular deliveries, according to firm President Don Marks. That can translate to losses of $4,000 to $5,000 each day, he says. "We lost three days the other week when we couldnt get concrete from anybody," Marks says.
Contractors in California say prices are even higher than in Florida, due to low imports and high residential demand. "Ive seen 20% increases in May and in June," says Chris Forster, vice president of Morley Construction Co. Inc., Santa Monica. "And we havent really experienced much of a [price increase] in the last five years." Higher fuel and shipping costs add to the problem, he says.
In New York, prices have climbed at a slower rate but they still are higher than normal for the region. Tommy Ruttura, president of New York City-based Ruttura & Sons Construction Co. Inc. and president of the American Society of Concrete Contractors, says local ready-mix suppliers hiked prices $3 per cu yd in April, $8 on June 1 and have announced another $10 jump to take effect in August.
"The critical lever in determining whether or not this is going to last is what happens on the import side," says Ed Sullivan, chief economist for Portland Cement Association, Skokie, Ill. He says shortages are most pronounced in the Southeast, Southwest and New England areas, where imports of processed cement account for nearly 30 to 40% of total supply. Other areas, such as the Great Lakes, only import about 16% of their cement total and are less likely to experience shortages.
Sullivan also points to higher demand for global transportation servicesparticularly by Chinaas a leading cause of the shortage problem. The Baltic Dry Index, a maritime industry barometer for shipping activity, posted record highs
in January, up 262% from a year ago. Although current freight demand is still 54% higher than in 2003, the numbers have been declining 12% a month since January, according to the index.
Signs of cement price inflation started to show up nationally in April, at a time when producers typically raise prices from $3 to $5 per ton to account for higher energy, material and labor costs, says Trip Rodgers, a research analyst for UBS...