FAQ: Record Cement Demand
About PCA>Supply FAQ

Updated September 16, 2005

1. Why is the supply of cement falling short of demand?
2. How has Hurricane Katrina affected the supply of cement?
3. How is the shortage affecting construction projects?
4. What countries provide the bulk of cement imports?
5. How long will the shortage last?
6. What are cement companies doing about the shortage?
7. What are cement companies doing to bolster supply?
8. Why doesn’t the industry build more plants?
9. Cement Industry FAQs

Why is the supply of cement falling short of demand?
Several factors have converged to create tight supplies of cement, the key ingredient in concrete, which is used in nearly every type of construction.

First, the U.S. is experiencing an unprecedented demand for cement. 2004 was a record year for U.S. cement consumption. Cement consumption in the United States grew to 114.6 million metric tons in 2004, an increase of 6.8 percent over 2003. This is an exceptionally high rate of growth that is not typical of the cement industry.

In 2005, cement consumption is projected to increase by 5.0%. Because mortgage rates have remained historically low, home building has continued to be very strong. In addition, nonresidential and public construction is also expected to increase as the economy improves.

How has Hurricane Katrina affected the supply of cement?
Cement consumption typically goes through a two-stage process after a Category 4 hurricane such as Katrina. First, consumption is immediately depressed, primarily due to cleanup. In the second stage, consumption accelerates above trend levels to make up for lost time and meet demand associated with repairs.
Katrina also affected cement shipments. New Orleans is the second largest cement volume port in the United States, processing nearly 10 percent of all cement imports. In 2004, 2.6 million tons of cement passed through the port of New Orleans, and prior to the hurricane, the port was on pace to receive 3.6 million tons in 2005.
Experts estimate that because of the extensive foundation damage due to flooding, it will take at least 4 million tons of cement during the next four to five years to rebuild New Orleans and the surrounding areas.

How is the shortage affecting construction projects?
Cement shortages are having the most visible affect on smaller companies, builders, or contactors due to delays or postponement of their projects. To PCA’s knowledge, no highway or major construction projects have been negatively affected by the recent shortage.

What countries provide the bulk of cement imports?
Canada is the top foreign supplier accounting for more than 20% of all cement imports into the U.S. The next two largest sources of cement imports are China and Thailand.

How long will the shortage last?
The cement shortages are regional in nature and can vary in length and severity. Some regions are more dependent on cement imports than others, and limited availability of shipping affects cement supplies in some areas. Cement imports reached 27.3 million metric tons in 2004, a 17.5% increase from 2003. Imports now account for 25% of U.S. consumption. Because of the seasonal nature of construction, cement supply issues can arise every year in some regions.

What are cement companies doing about the shortage?
Cement companies are deeply concerned about the inconvenience the shortage is causing to the construction industry and to consumers. The companies are working closely with their customers to meet their supply requirements, including expanding production and storage capabilities, reconfiguring distribution networks, and increasing imports where necessary.

What are cement companies doing to bolster supply?
U.S. cement plants are operating at maximum levels, as they did throughout 2004. To meet market demand last year, cement producers drew 4 million tons from inventory. This year, inventory levels are at historic lows and a further draw-down is not likely.

To meet demand, additional cement is also being imported. Imports’ share of the total market rose from 20.6% in 2003 to 22.7% in 2004. PCA expects imports will reach more than 25% during 2005 through 2007.

However, higher shipping rates and a shortage of cargo ships might hinder the ability to bring in imported cement.

In spite of these challenges, cement suppliers successfully increased import tonnage by 17% to 27.5 million metric tons during 2004. During the past six months, import tonnage has been averaging more than 32 million metric tons on an annualized basis (SAAR, seasonally adjusted annual rate).

Longer term, individual cement companies are actively working to build new plants to increase supplies. U.S. cement manufacturers have announced plans to spend approximately $3.5 billion to build new plants and expand existing ones to produce an additional estimated 14.5 million tons of cement per year by 2010. That represents a 15% increase over 2004 domestic capacity levels.

Cement Industry Background

What is the size of the cement industry?
The cement industry is a relatively small but significant component of the U.S. economy, with annual shipments valued at around $11 billion. In the United States, 39 companies operate 118 cement plants in 38 states. Worldwide, the United States ranks third in cement production, behind China — the world’s leading producer — and India.

U.S. cement production is rather widely distributed. The largest company produces just over 14% of the industry total, and the top five companies collectively produce around 53%. Foreign companies now own approximately 79% of U.S. cement capacity, up from about 22% in 1980. Overview of the cement industry

What are the trends in cement manufacturing capacity?
Average kiln capacity has increased steadily for the past two decades from 292,300 tons in 1983 to 494,500 tons in 2003.

How have consumption trends changed over the years? What are the projected consumption levels for the coming years?
California, Texas, and Florida are the front-running states in cement consumption, accounting for more than 30% of all cement consumed in the U.S. Over the last thirty years, Nevada has emerged as the leader in terms of cement consumption growth.

China dominates the global cement landscape accounting for 41% of all the cement produced, followed by India and the United States.

What is the difference between cement and concrete? What kind of cement is “portland” cement?
Although the terms cement and concrete often are used interchangeably, cement is actually an ingredient of concrete. Concrete is basically a mixture of aggregates and paste. The aggregates are sand and gravel or crushed stone; the paste is water and portland cement. Concrete gets stronger as it gets older.

Portland cement is not a brand name, but the generic term for the type of cement used in virtually all concrete, just as stainless is a type of steel and sterling a type of silver.

Cement comprises from 10 to 15 percent of the concrete mix, by volume. Through a process called hydration, the cement and water harden and bind the aggregates into a rocklike mass. This hardening process continues for years meaning that concrete gets stronger as it gets older.

 
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