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A Concrete Outlook at the Construction Industry
By Dave Fentress
As we have heard in the national news, several areas of the
country have experienced severe supply problems with cement,
and thus some concrete producers have been unable to supply
projects with concrete. Here in the Northwest, cement supplies
have been tight, but for the most part, with the exception of
the Spokane market, the industry has been able to meet customer
orders. As close as California and Nevada, concrete producers
are having difficulties with cement availability and have had
to close periodically when they do not have cement. Currently,
23 states are reporting cement supply problems.
Supply & Demand, Transportation and the 2010 effect:
There are several factors which have converged to create tight
supplies of cement, the key ingredient in concrete. First, strong
construction markets have increased demand. In the U.S., construction
spending is reaching all-time highs. It's also fairly strong
worldwide, particularly in China. High demand has sharply driven
up the price of the cement that was available on the world market.
Intensity gains are another major factor, or increased use of
cement per construction dollar. Green building projects use
more concrete because of its thermal mass, high durability,
low life cycle costs and other attributes which contribute to
sustainability. Large increases in structural steel prices are
making concrete structures even more competitive when compared
to steel, further increasing demand. In the aftermath of Katrina,
stringent building codes calling for more robust construction
will increase the use of cement based products. Market segments
are expected to change as well. Increasing interest rates will
mean a slight slowing in residential demand, but the public
and non-residential sectors are expected to grow substantially.
These sectors are more cement intensive per dollar than the
residential markets, leading to increased demand.
High capitalization costs, coupled with low returns on investment
have meant little expansion of domestic cement production. Zoning
laws, long expensive permitting processes, and regulatory roadblocks
have long been a problem for heavy industries such as cement
and will continue to limit the actual realized amount of expansion.
Cement companies have announced plans to invest over $3.6 billion
dollars to expand domestic capacity totaling more than 11 million
tons between now and 2010.
Historically, domestic plants carried an average of a two week
supply in inventory. Today, the industry is operating at low
inventory levels of a six day supply. Plants are running at
high capacity in order just to maintain these persistently low
inventories. These high operating rates leave little time for
critical maintenance, bringing Murphy's Law into play.
To fill the gap between domestic production and demand, the
United States depends on imported cement.
While cement may be available, shipping has skyrocketed and
availability of ships is very limited because of the booming
Asian economy. Here in the Northwest, our cement imports come
from both Asia and from Canada (specifically British Columbia).
With the Olympics coming to Vancouver, B.C. in 2010, some of
the cement currently imported from that area may not be available
for Washington and Oregon customers.
Cement Replacement with Fly Ash in the Northwest:
The primary fly ash supply source in the Northwest has been
the power plant in Centralia, Wash. Currently the industry is
experiencing spot shortages of fly ash. "GreenBuild"
specifications have specifiersincreasing the percentage of fly
ash in commercial mixes. In order to meet demand for these higher
ash contents specified into commercial jobs, a few producers
have had to remove ash from residential mixes. In some cases,
the net effect of the "Green" movement has been to
simply move the ash consumption from the residential to the
commercial market. In other areas that are outside the Northwest,
such as Wyoming and Alberta, Canada, there is quite a bit of
ash available, but transportation costs and logistical problems
with rail transportation make it uneconomical.
Solutions:
Performance mixes offer some relief from the cement and flyash
shortages. When a producer has the option to supply performance
mixes, it is possible to reduce cementitious contents and
achieve equal or better performance through the addition or
optimization of the admixtures in the concrete mix design.
Minimum cement content specifications contents often require
a Ready Mix producer to supply concrete mixes with more cementitious
materials in them than they actually need.
More than ever, the Northwest construction industry is competing
in an increasingly global economy. This is illustrated by
the impacts other countries are having on our supplies of
materials.
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