Mexico and its southern neighbors have been steadily invading America. There has been a strong flow of immigrants into the U.S. to take minimum-wage jobs, of course, but people aren’t the only “invaders” from the south. Another is cement.
Cement shortages have been prevalent in parts of the U.S. for the last several years, exacerbated by a strong housing market and hurricane-related repairs. The cement shortages are real and have been getting worse.
Most of the large cement producers in the U.S. are foreign-owned companies. These foreign-owned U.S. subsidiaries have managed to keep Mexican imports out of the U.S. market through a dumping tariff. However, the tariff has been sharply reduced and will be eliminated in 2009. As a result, Mexico and other Latin American cement producers are beginning to move into the burgeoning U.S. market.
Even so, new cement producers have had some difficulty penetrating local U.S. markets dominated by existing companies. Domestic cement prices are near record levels, currently around $100 per ton compared to about $80 per ton when demand was less. This should be an opportunity for low-cost imported cement producers. However, new competitors who try to import cement to compete with established domestic mills risk being shut out of local markets by mills that are willing to cut prices.
Some astute foreign cement producers have been buying concrete truck distribution fleets that make local deliveries, which ensures them of a place in the supply chain. Gaining control of truck fleets should make it easier to import cement to meet the strong U.S. demand.
With demand strong, an increase in imported cement moving by barge is expected. The economics of moving imported cement by barge through the port of New Orleans are good when compared to other ports and rail delivery. In the past, the uncertainty of U.S. producer retaliatory pricing has limited movements of imported cement to the Lower Mississippi River.
Now, with foreign-owned concrete distribution systems, it’s expected that imported cement will move farther upriver. This is a natural market that has just been waiting to happen. This new overseas competition should ensure that cement movements by barge become much more prevalent in the future.