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Week of May 06, 2004 |
| Cement shortage driving up prices of real estate
By Samantha Joseph A shortage of cement is adding to building costs, construction delays and real estate prices. High levels of construction statewide and record demands for building material in Asia have combined to drain global cement supply. Construction in China, which industry experts say is expected to consume 40% of the world's cement this year, drove up shipping costs, limited freight service to South Florida and slowed construction nearly 15%. "We are losing money," said Pepe Cancio, president and CEO of Supermix, which uses cement to make the liquid concrete it produces. Mr. Cancio said this week that his company is operating at 50% capacity. Only able to secure half of the cement it needs, Supermix has had to delay work on a major project in the Dadeland area, the Metropolis, he said. The development's foundation needs 1,100 tons of cement, an impossible amount to come up with with suppliers rationing the product, he said. "We haven't been able to do it because we don't have the cement," said Mr. Cancio. The project has been on hold for two weeks, and he said it isn't clear when work might resume. Supermix, which usually relies on local suppliers, has turned to Central Florida plants, he said. Statewide, builders use about 9.2 million tons of cement each year, nearly twice Florida's annual production, according to Florida Rock Industries Inc. of Palmetto. The state imports nearly 4 million tons of cement, most from overseas. With heavy demand driving freight prices up at least $15 per ton, Florida companies such as Cemex in Brooksville are warning customers to expect to pay more. "(There) is significantly less available cement in the world," Frank Craddock, executive vice president of sales at Cemex, said in a letter to clients. "Due to this pressure on supply and huge increases in the world shipping market, imported cement costs have increased substantially this year." Announcing price increases effective July 1, Florida Rock Industries Inc. said, "There appears to be no relief in the immediate future." Lennar Corp. said the shortage has delayed by one to two months its work on nearly 400 homes in Miami-Dade County and has driven up the cost of each home 5%. "We are definitely being impacted," said Lennar Developers Inc. president Anthony Seijas. Buyers who expect to close on homes in the next six to 18 months will feel the pinch. "Obviously, we can't pass all the extra costs on to the customer. We end up absorbing some, and the customer ends up absorbing some," Mr. Seijas said. While some suppliers expect increased production in Florida to help alleviate the shortage within weeks, Mr. Seijas said he anticipates a longer recovery period as suppliers try to ease the backlog. Meanwhile, Michael Cannon, real estate analyst and managing director at Integra Realty Resources South Florida, said a realistic approach to pricing could help builders avoid losses. "This is not a time for anybody to guess at it," he said. "They better know what their costs are and whether they can meet it. If not, they will be in trouble." If they continue, Mr. Seijas thinks the shortage and price increases could hurt consumer confidence and the entire industry. "Ultimately, it means that clients need to have a little bit of patience with regards to when we told them their homes would be completed and when it would actually be complete." |
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