Cement in Short Supply, Prices are Rising

A recent spike in construction throughout the southern United States has caused a cement shortage that is inflating prices charged to and passed on by local contractors, landscape contractors and masons.

Economic experts predict the cost run-up will have dire effects on next year’s housing and commercial property markets if the supply problems are not reversed, a situation that would undoubtedly cripple demand for new homes and construction-related services. The price increases have already affected some local businesses, pushing their cement-related costs up by 15 percent to 20 percent over the last several months.

There is also speculation that construction related to postwar Iraq and China’s overheated economy have siphoned off large percentages of the United State’s cement. The yet-to-be-completed Three Gorges Dam across China’s Yangtze River and myriad military and civilian needs in Iraq are often cited by the industry for the cement shortage.

Amy Carneal, a senior economist with Global Insight, an economic consulting firm in Waltham, said there is little evidence to support those theories, adding that the U.S. has used about the same balance of domestic and foreign cement for the last few years.

Carneal said the shortage’s likely origins date back to May when Titan America, a major cement manufacturer with operations nationwide, lowered production to make major equipment upgrades at its 50-year-old plant in Medley, Fla. The company, which supplies about 10 percent of Florida’s cement when operating at full capacity, has since opened a new $225 million facility, also in Medley.

“That’s when we started to see issues pop up,” Carneal said. “I think we’re just starting to see greater pressure in the U.S.”

Cement is a compound made in most regions of the country. When combined with crushed stone and water, it is used to make the concrete used in building foundations and related infrastructure.

With demand for new homes and commercial buildings booming in the Southeast and Southwest, the shortage in Florida has rippled to other cement-supplying areas of the country. Should the country’s housing market continue at a red-hot clip, Carneal worries that the shortage will lower consumer demand and potentially send a shock wave through the economy.

“If we don’t see some relief (in housing demand) by the fourth quarter, I’d say we’ll see some implications for the building market next year,” she said.

At Butler Lumber Co. Inc. in Maynard, where building contractors can load up on 94-pound bags of cement, prices have risen by more than 15 percent since June. While customers have grown accustomed to the hikes, which are established at the manufacturing level, the company worries that a prolonged rise in prices will force contractors to curb their purchasing.

“We can’t eat the increase – we’re talking serious money,” said Ron Starr, Butler Lumber’s president. “But there’s no question that people have a certain amount they can spend. It forces people to make decisions.”

Steve Macura, co-owner of Macura Construction Co. Inc. in Framingham, said the frothy cement market has also caused major delays in receiving concrete shipments. Regardless of the building boom in the South, he thinks the problem, which has held up several projects, can be linked to major developments overseas.

“They (Iraq, China) are buying up all the cement. That leaves the industry down on supply; therefore prices rise,” Macura said. “We’re at a point in our economy where no one’s raising prices except cement manufacturers.”