Newton, Mass.—Huge building growth in boom markets such as California and Florida continues to fuel demand for cement, putting a crunch on some regional contractors that are trying to secure their allocations.

For construction distributors, the shortage may mean a delay in some building projects, and price increases.

A recent nationwide survey by the Portland Cement Assn. showed portions of 28 states were reporting spot problems getting enough cement. U.S. cement consumption reached a record 119.9 million metric tons in 2004 and is up 7 percent over strong 2004 levels, according to the Skokie, Ill., association.

One culprit is low interest rates, causing a surge in home construction. A post-tsunami building boom in South Asia and India, growth in China, and fewer ocean freighters available to move imports have added to the shortage.

"The trends are alarming," said Ed Sullivan, chief economist for PCA. "If you look out over a 10- to 15-year horizon, demand will likely rise at a 2 percent rate, and we've already got our capacity full out. The only way to feed this rise in demand is with imports."

Domestic cement plants can only produce about 75 percent of the cement the country needs, with imports being "our swing supply," Sullivan said. There are currently 39 companies operating 118 cement plants in 38 states.

While help is on the way, it will take time, Sullivan warned. "Through 2010, the U.S. will add 11.5 million tons of capacity, with 7.5 million of that increase occurring in 2008. But companies are hindered in their demand to expand by local zoning laws.

"No one wants a cement plant in their back yard," he added.

According to one California distributor, the shortage is more "psychological than actual."

"Builders and developers are aware of the problem, but I don't know if it's trickling down to where they are scrambling to find alternative sources of materials," said Hal Look, vice president of marketing and business development for Orco Construction Supply Co. in Livermore, Calif.

There are allocation issues in southern California, but the real big cloud sitting over the region, Look said, has to do with anti-dumping tariffs placed on neighboring Mexico, which exports cement to the United States. Lifting the tariffs would "open up the gates of supply" and weaken prices, he added.

"There is a lot of lobbying going on at the builder/developer level to have Congress ease up on these tariffs. Tons of capacity are just sitting right across the border and we could have it in three to four days. Getting supply from Asia takes about 40 days,"he said.

Demand is not such that contractors are shutting down sections of housing because they don't have supply, he added. "But companies, including us, are looking at alternative suppliers and nurturing those relationships so that they get their allocation stake.

"This is absolutely happening, and it's a way we have staved off an actual loss of business at this point," Look said. "I don't see the problem easing up unless there is a political solution."

Orco was impacted by the volatile steel market, when contractors were buying 60–90 days worth of supply at a time, Look said. "But I don't think that degree of hedging is going on. Some people might be buying an extra 30 days of supply."

It's a different story in the Northeast, where Paul Robichaud, president of Robi Tool reported, "The only shortage here is money.

"They say there is no inflation, but I don't know what guidelines they are using that they can't see it. Everything is going up. The cost of fuel has doubled in two years, and without fuel and petrochemicals, you can't drive, you can't move the product," Robichaud said.

The Somerville, Mass., distributor saw changes two years ago when the price of steel escalated, but its business has not been affected by the cement shortage. "We just don't see it," says Robichaud.

"In real estate, they say location, location, location. In distribution, it's overhead, overhead, overhead. That's our concern," he added.