Everyone knows about surging oil costs, but another pricey commodity has economists spooked: cement. With consumption of cement reaching record levels for the third consecutive year, builders in 32 states have reported shortages. "It's definitely a deteriorating situation," says Ken Simonson, chief economist for the Associated General Contractors of America.
The domestic housing boom, hurricane and tsunami rebuilding efforts, and voracious Chinese consumption have created unprecedented demand. Meanwhile, high shipping costs and overburdened ports and railways have hindered resupply efforts.
The crisis seemed to peak late this summer when the governors of Florida, Nevada, New Mexico, South Dakota, and Utah petitioned the Commerce Department to suspend a 15-year-old tariff on Mexican cement. Though Mexico is one of the world's largest producers of cement, the tariff, which adds an extra $75 on every $100 purchase, has made imported cement prohibitively expensive for U.S. builders. The Commerce Department is weighing the proposal.
Simonson and other economists fear that if shortages persist, they could impede new construction, a scenario that could pop the housing bubble, which would have serious economic consequences. There's also the fear that many small developers will be driven under. Mark Neumann, CEO of Neumann Enterprises, a developer in Nashotah, Wis., who also owns 50% of two homebuilders, says by ordering ahead and timing his projects carefully, he's managed to weather the high prices and shortages. So far. "Sooner or later," he warns, "the upward price pressure will slow the market."