Tightening U.S. Cement Supply Highlights the Need to Expedite $3.6 Billion Cement Manufacturing Expansion

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Depending on what part of the country you are located in, you may have experienced difficulty getting cement to your jobsite. Cement shortages have been reported again in various states this year as residential, commercial, and industrial construction projects begin construction. It seems a combination of increased demand, transportation issues, and the inability to increase much needed imports to support domestic production, is adding to the problem. At $100 per ton, the price of cement has risen almost 25% in some parts of the country compared to 2003. Because of hurricane Katrina, Southern states, already in tight supply situation will be facing major infrastructure rebuild projects, putting further stress on the cement supply/demand situation.

The long-term solution, it seems, would be to expedite cement manufacturing plant expansion plans and shore up domestic distribution and transportation infrastructure. This, while easy to conceive, may prove difficult to execute, as it can take years to permit cement plant expansions in the U.S. Recent setbacks in cement plant development, such as the failure of Saint Lawrence Cement, a subsidiary of Holcim (Jona, Switzerland) to permit a new plant in New York, after an eight year permitting and litigation battle, highlights the difficulties cement producers face in permitting new facilities. See May 6, 2005 news article for details - Holcim Moves on Major Cement Plant Expansions in the U.S.

Industrialinfo.com is tracking 18 grassroot cement plants or expansion projects in North America, totaling 21.2 million tons per year in potential capacity. These projects represent $3.6 billion in potential spending and a 20% increase in production capacity over the next five years.

Click on the image at right to view a chart showing the breakdown of active cement manufacutring projects by state.

Currently, there is very little new capacity that will come online in the short term. Very few projects have passed the approval stage and are under construction. Illinois Cement Company (La Salle, Illinois) is under construction with an expansion to increase capacity from 670,000 tons per year up to 1.1 million tons per year. Probably the biggest news this year is that TXI (Dallas, Texas) is starting a major expansion in California, but that job will not be finished until late 2007. Site work construction kick-off, which was originally scheduled to begin in August, has been delayed as the owner negotiates pricing with contractors.

For the most part, both consumption and production of cement have risen evenly over the last five years. According to the USGS, in 2004 the U.S. produced about 95 million metric tons of cement and consumed close to 121 million metric tons. The U.S. imports around 23% of its cement needs. Since U.S. cement plants are operating at near capacity, the only solution to the problem in the short term is to increase imports. The U.S. has not been successful in increasing imports significantly, due to the overall global cement situation, with countries like China taking large portions of available imports. This may necessitate the removal of tariffs on cement imported from Mexico. The U.S. receives about 21% of its imported cement from Canada, but due to high tariffs imports from Mexico are limited.

Earlier this year, Cementos Y Concretos Nacionales (Tepezala, Mexico) began construction on a new $311 million cement plant in Cuautlancingo, Mexico. Polysius (Mexico City, Mexico) was the turn-key equipment vendor for the project. The 1.1 million ton per year plant is scheduled to be up and operating by the end of 2007. Also in Mexico, by Summer 2006, Lafarge should complete a new 600,000-ton per year plant in Vito. Mexico.

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