Post by Admin on Aug 30, 2004 0:55:49 GMT -5
AZMN - SPECIAL REPORT
Gray gold
Cement prices soar amid shortage
By Barbara Smith/Business Writer
A shortage of cement is cracking the foundation of California's brisk building industry, and most experts agree it could continue through the remainder of this year - and even beyond.
The scant supply of cement has not only spiked the cost to homeowners and contractors and delayed construction projects, but it has suppliers of ready-mix concrete operating under an allocation system.
"Cement is the gray powder that's turning into gold," said Brett Leber of Dixon's Leber Concrete Construction Inc.
Leber, like most industry veterans, attributes the shortage to several factors - but primarily because much of the product is being exported overseas, the lion's share to China where construction is underway on the Three Gorges Dam on the Yangtze river. When completed, it will be the largest hydroelectric dam in the world.
Leber said his suppliers of ready-mix have been getting the materials to his job sites on time, but others are not so fortunate.
"There's a lot of smaller contractors and homeowners that have felt the crunch, as far as delivery times and price," he said.
Leber is, however, having a problem with the price increases. In the past year, the cost of cement has gone up about 15 percent, he said.
A 2,000 square-foot foundation today costs roughly $25,000 for labor, equipment and material. That's 18 percent more than a year ago, and 10 percent more than a year before, he said.
Leber said a 40 percent increase in the price of diesel has also contributed to the price increase. There's a four-step process before the cement actually makes it to the job site, he said.
The diesel-fueled truck brings the rock from the quarry to the concrete plant, then sand to the concrete plant, then the cement is trucked.
"Then when you mix it, you've got to put it in a truck to get it to the site," Leber said. "That's four times they've got to truck that stuff before they get it in the ground, basically."
Dave King, owner of Vacaville's Castle & King Rock & Ready Mix, said he's been allocated only about 50 percent of what he was supplied before the shortage.
"We only get so many loads a month, and after you do your allocation, you sit and wait for the next month," King said. "I haven't seen it (like this) since I first started business in 1975."
He would not say how much he pays for cement, but he does pass on the increased costs to the customer.
"We received in the last three to four months $15 a ton increase," King said. "That's a lot."
Small contractors don't get bulk cement, and rely on the suppliers for the bulk. The suppliers sell what makes concrete - cement powder, aggregate, sand and water.
"Most of it's going to China right now," he said. "That's why it's so high. They're paying more money for it. I hear it's supposed to turn though, but I don't know."
According to a recent survey conducted by the National Association of Home Builders, a shortage of cement and other key building materials looms as the biggest threat to the housing market that has produced record levels of new home construction in the U.S.
A nationwide survey conducted in July shows that builders are reporting not just shortages of cement, but wallboard, steel framing and insulating materials. Rising wholesale prices of building materials have added $5,000 to $7,000 to the cost of building an average new home, according to the report.
In California, cement is manufactured only in Redding, San Jose, Southern California, and one producer in Nevada, said Bob Perrine, vice president and manager of concrete products division of Sacramento-based Tiechert Construction.
Tiechert's ready-mix market is from Fairfield to the El Dorado Hills, and from Marysville to Lodi. The balance of the cement to meet the demand is imported out of Asia, Perrine said.
While China is consuming 50 to 60 percent of the cement produced in Asia, difficulties in shipping is a major factor in the shortage.
"And what happened is we didn't have a winter," Perrine said. "Normally you have the rains and construction slows down, and come spring, it picks up, but residential building continued throughout the winter."
Meanwhile, imports weren't scheduled until the spring, so the demand drove the price of the shipping.
"So the ready mix producer has this year seen two price increases, and we anticipate another increase in September and October. That will be three increases in a year, that's what we're being told," he said.
And it isn't just the price of diesel that factors in but the "wildcat strikes" truck drivers went on recently to get increases in the haul rates to cover their expenses, he said.
Cement has increased $5 a ton, and Tiechert can only pass on the higher prices to new customers, Perrine said.
"When we bid a job, we don't have a way to go back and raise our prices, we've been absorbing a quite of bit of the increase," he said. "it impacts our bottom line, definitely."
Perrine said if we have a normal winter, the shortage may go away and allow the suppliers to play catch up in the inventories.
"They are predicting currently that the shortage will continue on to the end of the year," he said.
Preservation of natural resources plays a key roll in the shortage, said Don McConnel, general sales manager of Napa-based Syar Industries Inc.
Syar Industries Inc. a manufacturer of road construction materials, also sells rock to ready mix suppliers from its quarry at Lake Herman, Vallejo.
While Syar has had its costs go up due to the greater demand, the lack of supply may continue to be an issue throughout the greater Bay Area and beyond. Significant sand and gravel operations in the Bay Area are no longer operating at all, McConnel said.
"You almost need to look at the state of California and recognize the resources and protect them so that they're available," he said.
After all, cement is simply the binder that when mixed with sand, gravel, water and small amounts of admixtures makes concrete.
"If you have a resource in the form of a rock quarry or an old ancient stream that is now not even in the channel any longer, that had sand and gravel in it, it's not that you can go anywhere and find that resource.
"If you were to take a shovel and dig up some of this sand and gravel you talk about, like you do at the beach, whatever is in that shovelful is what you have to deal with."
In the marketplace, everybody wants more and that creates the imbalance, he said.
"You can alter some things, but when it comes to sand and gravel, it's pretty basic. We need to recognize that we need these resources and protect them for use down the road," McConnel said. "Mother nature only gives you so much sand."
www.thereporter.com/Stories/0,1413,295~30189~2352169,00.html
Good Evening,
I began tonight's column with the above article for a reason. Read the last sentence again.
Go ahead, read it again.
Now go to azco.com and verify for yourself how much sand AZMN owns, keeping in mind, this is not your ordinary run of the mill concrete type sand. AZMN sits atop a massive reserve of what I refer to as Hi-Tech Sand. While you're there, you may also want to look at the Mica reserves. Far more hi-tech, and far more valuable. By the way, mother nature isn't making any more Mica either.
Incidentally. Not many people really understand what Azco's Mica potential means for this new Century's technologies. Once this product gets into major productive processes its usage and value will grow exponentially.
