Allocations for Concrete’s Key Ingredient Causing Construction Issues
Cement is the “glue” that holds concrete – the literal and figurative building block of construction. So, when cement is impacted so too is construction.
In his more than 45 years working with cement – and in the product’s final form, concrete – Dan Smith has built a great respect for the material’s major role it holds in construction and the void it provides when not readily available. “The whole world is built on concrete,” said Smith, who serves as Structures manager for Jurgensen Companies. “… Every building you see, every house that you see, every bridge that you see, every retaining wall; concrete is probably the No. 1 used building material in all construction.” The 2004 OCA chairman also knows the effect felt when one of the top-used construction materials is in short supply.
The short supply of cement, the chief ingredient of concrete, is the latest obstacle the heavy-construction industry is facing. The construction industry lists several factors for the cement shortage; Associated General Contractors (AGC) of America Chief Economist Ken Simonson says it is simple supply and demand.
“I think the fundamental problem with cement is a growing mismatch between supply and demand,” Simonson said. “We haven’t added to cement-making capacity in this country since around 2009, and of course the economy is growing and with it so too is demand for highway and other concrete-intensive construction.”
Though it has been nearly 15 years, concrete production in the U.S. has not returned to the levels they were prior to the 2008 recession. However, demand for ready-mix concrete has steadily grown since. According to U.S. Concrete Industry Data, U.S. Ready Mix Concrete Shipments grew 57% from 2009 (258.6 million cubic yards) to 2022 (when it was expected to reach 406.7 million cy). And with increased demand, so too have higher costs. In just the past year (October 2021-October 2022), cement costs have jumped 13.4%, according to AGC data.
However, rising prices aren’t of chief concern for many contractors when it comes to cement – it’s availability.
Concrete & Cement, Cement & Concrete
The words are often used interchangeably, but – like warranty and guarantee; pills and tablets; and cyclones and hurricanes – cement and concrete are two different things. “Even construction professionals sometimes incorrectly use the terms ‘cement’ and ‘concrete’ interchangeably,” according to www.cement.org (and yes, there is also a www.concrete.org). “Cement is actually an ingredient of concrete. It is the fine powder that, when mixed with water, sand and gravel or crushed stone, forms the rock-like mass known as concrete.”
Concrete consists of four components: air – up to 8%; cement – 7%-15%; water – 14%-21%; and aggregate – both coarse and fine, 60%-75%. It is the cement and water, however, that when mixed forms a paste that coats the surface of the aggregates. This cement and water paste, through a chemical reaction called hydration, binds with the aggregate and hardens to form concrete.
Portland Cement is the most-common type of cement, according to ScienceDirect, and consists of limestone, clay and gypsum. When the limestone and clay is heated to more than 2,700 degrees Fahrenheit in a rotating kiln it produces “clinker,” which when cooled is mixed with gypsum and grounded into a powder.
Once one knows the role cement plays in concrete, it’s not hard (pun intended) to understand why contractors are impacted when there is a shortage of the material.
In the last quarter of 2022, Gerken Paving Inc. suffered a 10%-15% loss in projected business due to cement shortages. “Prior to September, we were not allocated, so it’s been the last three or four months that we have been under cement allocation,” said Gerken Concrete Division Vice President Dean Breese. Breese added that the cement shortage affected the company’s residential work. “The bigger jobs we already had on the books,” he said. “We tried to schedule them so we weren’t affecting them as most. What got affected were all the projects that weren’t anticipated, we just couldn’t service them.”
Other OCA companies have also had cement shortages impact their work.
Jurgensen V.P. Chris Jones said the company couldn’t fulfill an ODOT District 8 change-order for cement stabilization on a State Route 32 project in Clermont County. “We looked for pricing and availability of cement material, but no one could supply the volume that we needed,” Jones said. “So, the project had to remain lime … Because of the material shortage, we couldn’t make the change they requested.”
The Coshocton Tribune, in a late October article, wrote how The Shelly Company’s full-depth rehabilitation and shoulder-widening work on S.R. 16 was impacted – and ultimately halted for the year – due to material allocations. “… It is not that the cement is not available, but it is being rationed out across the market,” ODOT District 5 Public Information Officer Morgan Overbey told the newspaper. “… There is uncertainty as to when the cement would be available and how much will be rationed out to the customer at this time …” The S.R. 16 project is set to resume in the spring.
For Breese, Jones and Smith, cement’s current shortage is unprecedented, as they haven’t seen inadequate supply levels like this in their more than 115 combined years in the construction industry.
So, what’s causing the cement shortage? There are a range of reasons and factors.
“EPA regulations are tightening and there is a lack of cement manufacturing plants in the U.S.,” Breese said, as he also mentioned business decisions made at those facilities. “Some of the cement manufacturers were looking at this year being a bit down for product need. So, they didn’t produce key materials in cement, like clinker, so that they wouldn’t have to pay inventory tax on product. Once they saw that the year was going to be better than expected, they never could catch up with production.”
Smith attributes cement shortages to a lack of kiln capacity, environmental permitting to construct new facilities and logistical issues on the Mississippi River. “They had historically low (water) levels where one of the nation’s larger cement-producing areas are, which compounded the issue,” he said.
“… The last time the Mississippi River reached those water levels was in the late-1800s,” Jones added. “It’s a big anomaly of what happened this year.”
AGC’s Simonson said you also cannot count out governmental decisions and the enduring labor shortage. “Some producers have used fly ash and slag from coal-fired power plants to add to the quantity of cementitious materials,” he said. “(However,) as those power plants shut down, those sources of materials have gone away.” And when it comes to labor shortages, Simonson reminded that the workforce challenges affecting contractors are the same for cement and ready-mix concrete producers, pre-cast concrete facilities and trucking companies.
Contractors are doing what they can to keep projects moving.
Jones said for Jurgensen Companies it’s about planning. “For us, really one of our biggest struggles is educating our people who order concrete on a daily basis. They should anticipate extended lead times; so, instead of needing concrete on Friday and ordering it on Wednesday, they need to order it two Fridays ago …”
“What we did immediately when we found out we were going to be allocated is that we rented additional cement storage,” Breese said of Gerken finding additional large concrete storage areas – called “pigs.” It was for rainy days – literally. “The reason we did that,” he added, “is so that on the days our contractors were rained out we could still get cement. We bulk up as much storage as we can so that we could run what we needed to do when we are producing.”
Contractors noted that project owners know of the cement shortage. “I think with the ODOT regime we have in there now,” Smith said, “it has done a very good job working with all the contractors with change-orders and price increases – they understand the problems. Or at least if they don’t know the problem, they’re willing to listen to it. They’re doing a pretty good job of working with the industry to try and mitigate these problems.”
