There was something for both sides in the cement trade agreement that U.S. and Mexican officials signed March 6. The U.S. gets higher shipments of Mexican cement, easing domestic shortages. Mexico has antidumping duties slashed. When the pact’s three-year term ends, limits on Mexican cement will be lifted completely. But making bigger dents in U.S. shortages will require producers to overcome local objections to building new facilities.
The agreement ends a 16-year dispute and lets Mexico export 3 million tonnes annually to the U.S. That’s a 50% jump over 2005’s level of 1.92 million tonnes, the Commerce Dept. reports. With last year’s hurricanes in mind, the pact allows exports of up to 200,000 additional tonnes if the U.S. determines they are needed to respond to a storm or other disaster. The duty rate will be cut to $3 per tonne, from $26. After three years, the duties and shipment cap end.
Where Shipments Would Go
|Area||First-Year Amount (Metric Tons) *|
|New Mexico/El Paso|| |
|Other Texas Counties|| |
|Rest of U.S.|| |
|SOURCE: U.S. Commerce Dept.|
U.S. Commerce Secretary Carlos Gutierrez says the deal “will allow U.S. cement producers greater access to Mexican markets, while ensuring our Gulf Coast communities have the resources necessary to rebuild.” Mexico Secretary of Economy Sergio Garcia de Alba says his country “gains the possibility of increasing cement exports significantly.”
Mexico’s shipments will be split among eight regions (table). In the initial 12-month period beginning April 3, Arizona receives the largest allocation. Hurricane-ravaged Louisiana gets 280,000 tonnes. Shares will be adjusted in the next two years.
But even the new level equals just 2% of 2005’s U.S. consumption. That won’t clear away U.S. cement customers’ problems. January’s mild weather boosted cement use, “making shortages even more likely than last year, when 32 states reported shortages by August,” says Associated General Contractors CEO Stephen E. Sandherr. National Association of Home Builders President David Pressly sees demand rising “as Gulf Coast rebuilding moves into high gear.”
To attack the gaps, “the only real solution is to get more domestic production,” says Ken Simonson, AGC chief economist. Hurdles tend to be local, he says. “Nobody wants cement plants in their backyard or down the road in the next county even,” he says. U.S. producers claim some headway, with permits to expand capacity by more than 15% through 2009, says the Southern Tier Cement Committee, a group of 23 U.S. companies. The expansion’s estimated price tag is $3 billion.