Cement Supply Update
Resources
Wood-Trading Web Site Links Buyers and
Sellers
Incentives Sweeten Energy Bill for
Builders and Homeowners
Faulty Faucet Floods House
Price increases and delays
likely as cement shortage spreads
Joseph Aspdin — the British stonemason who cooked up
some clay and limestone in his kitchen and in 1824 patented the
resulting hybrid as portland cement — would have been
astounded to know that the U.S. alone used 119.9 million metric
tons of cement in 2004. That's an increase of roughly 7 percent
over 2003 — and according to experts, those numbers are
only going to get bigger as consumption continues to grow over
the next few years. The summer 2005 Forecast Report of the
Portland Cement Association predicts that usage this year will
be 5 percent higher than it was last year, and 3.3 percent
higher in 2006 than in 2005.
The unprecedented demand, fueled in part by record
single-family housing starts, is putting pressure on cement
suppliers, who are already operating with slim inventories
drawn down to meet last year's demand. Ed Sullivan, chief
economist at the PCA, reported in May that 23 states were
experiencing regional cement shortages; in August, he said that
the shortage had spread, and six more states were reporting
supply problems.
In response, U.S. cement manufacturers are ramping up
production and the country is importing more cement than ever,
but hurdles remain. One is simply the time it takes to permit
and build factories and infrastructure. Holcim's Quebec-based
St. Lawrence Cement recently dropped plans to build a new plant
in Greenport, N.Y., after spending more than six years
attempting to acquire the 17 necessary permits for
construction. Holcim is, however, going ahead with construction
on a plant in Missouri, which is scheduled to open in 2008 and
is slated to produce more than 4 million metric tons of cement.
A number of other cement manufacturers are expanding current
facilities or planning new ones. Industry projections call for
a 15 percent increase in production by 2010, about half of
which will occur in 2008.
In the meantime, the construction industry is relying
increasingly on imports, a partial solution at best. "The big
problem," says Sullivan, "is the availability of shipping. And
shipping rates are up to $50 per ton from $16 just two years
ago." Concrete Producer magazine reports that some
4,000 ships are being built, which should eventually relieve
some of the shipping pressure.
Trade groups like NAHB and Associated General Contractors are
looking south rather than overseas. They see the "anti-dumping"
duty against Mexico — imposed in 1990 because U.S. cement
producers objected to price competition from Mexico — as
a major obstacle to accessing cement imports; both
organizations have been advocating to have the duty
repealed.
Sullivan, though, says that while such a repeal might help, it
won't solve the deeper problem. "The shortage is bigger than
what Mexico can supply," he says, "and there's a transportation
constraint — Union Pacific can't get enough rail cars to
move the cement." He also notes that the anti-dumping duty
hasn't had a significant dampening effect on Mexican imports.
In 2004, cement imports from Mexico increased by a whopping 68
percent, and so far this year imports are up another 99 percent
over 2004.
Just how squeezed contractors are feeling depends on where
they live and work, underlining the shortage's regional nature
and its dependence on a combination of localized demand and
proximity to supply. John Kaltenbach of John Kaltenbach Homes
in Albuquerque and Santa Fe, N.M., reports that his company is
feeling the effects in a major way: "The cement shortage hit
amazingly hard and fast just a month ago," he says. "The
suppliers are limiting the amount of ready-mix that builders
can get in one day and are sending out full orders for regular
customers only. … They're charging for full loads, so if
you need a short load you take a huge hit."
But Gerald Poteet of Poteet-Allen Contractors in Indian Trail,
N.C., says that in his area the impact has been minimal. "We
haven't had any problems getting concrete in 2005," he says,
though he has seen "price increases every six months since the
cement shortage came to light."
Gene Lorson, owner of Lorson Builder in Hope, Kan., says that
his ready-mix supplier hasn't had trouble getting the cement it
needs. And in Texas, concrete has "gone up 25 percent in price
in the last six months," says Allan Edwards, of Houston-based
Allan Edwards Builder, but he's been able to get his supplies.
— Laurie Elden
Resources
Hurricane Katrina
and its
aftermath of flooding have caused billions of dollars of damage
in Louisiana, Mississippi, and Alabama. In a report released
Sept. 2, NAHB estimates that "a large share of the more than
200,000 homes in the city of New Orleans" are "damaged beyond
repair." This compares with around 28,000 housing units
destroyed by Hurricane Andrew in 1992, and some 27,500 units
destroyed by the 2004 quartet of hurricanes. The report
predicts that area construction labor is going to be focused on
repairing salvageable homes, rather than building new homes,
and that supplies such as plywood, OSB, and roofing will be in
demand. Prices for lumber and panel products had already
started to rise at the end of August as a result of
hurricane-related factors: Fuel prices increased due to
refinery damage, lumber imports had to be rerouted from
affected Gulf ports, and domestic production was disrupted at
Southern lumber mills. According to NAHB, "further increases
for those products, as well as for roofing, are likely."
Retirement Planning Help
Contractors interested in offering their employees IRA-based
retirement plans should check out the IRA Resource Guide for
Small Business Owners and Individuals. Available at no charge
from the IRS, this CD-ROM includes information about
traditional and Roth IRAs, simplified employee pensions (SEPs),
and payroll-deduction IRA plans. For a free copy, call the IRS
at 800/829-3676 and request publication 4395.
Free Battery
Disposal
When portable rechargeable batteries die, you can't just toss
them in a dumpster — they need to be disposed of
according to federal and state regulations. If you're looking
to get rid of dead batteries from your cordless tools,
cellphones, and other portable electronic devices, check out
the free Call2Recycle program, offered by the nonprofit
Rechargeable Battery Recycling Corp. While the RBRC doesn't
take regular alkaline batteries, it does accept nickel cadmium
(nicad), lithium ion (Li-Ion), nickel metal hydride (niMH), and
small sealed lead (Pb) batteries, as well as used cellphones.
Currently, over 30,000 retail businesses nationwide
participate. To find your nearest drop-off location, or to
learn more, visit www.call2recycle.org or call 800/8-battery
or 877/2-recycle.
So you think you've met the client from hell?
Check this out. According to papers filed in Brooklyn federal
court and recently reported on by the New York Times, retired
NYC police detective Louis Eppolito told a federal informant
about some stern advice he had for the contractor working on
his house when the project fell behind schedule. "I said,
‘If you don't finish this job today or tomorrow,' I said,
‘I'm personally going to kill you in front of your
friends. Then I'm going to kill your friends.'" Eppolito was
arrested on mob-related murder charges before he was able to
make good on his threat; he is now free on bail.
In reaction to the frenzy of "defects"
litigation over the last decade, more and more states
are enacting laws that give a fair shake to builders accused of
shoddy workmanship. Missouri recently became the 27th state to
enact a "notice and opportunity to repair" (NOR) law. In effect
since August 28th, the law requires a homeowner to give the
builder written notice of the alleged defect, which the builder
then has 14 days to inspect. If the builder decides to remedy
the problem, he must do so within a "reasonable" time.
Wood-Trading Web Site Links
Buyers and Sellers
In the housing industry's classic small-player market, Web
commerce has big promise. One example is WoodPlanet
(
www.woodplanet.com), a matchmaker for
buyers and sellers of small lumber lots.
Sellers pay the Web site's way, while buyers, including
builders and remodelers, use it for free. Explains company
executive Tami Kaufman, "We don't take a cut. We just help the
buyer make that initial contact with the seller, then we step
away." Sellers post offers to sell wood on the site, and buyers
post requests for quotes on their particular need. Posts expire
after 60 days.
WoodPlanet does keep tabs on transactions, says Kaufman:
"After a couple weeks we follow up with the buyers and sellers
to find out what happened." Success rates vary depending on the
material. "Hardwood lumber and flooring are easy for us to help
buyers with. Typically a buyer finds a supplier and a price
they like, and they purchase within a few days," she says. "But
some custom orders are more difficult to fill, such as a custom
flooring shape in a hard-to-find species."
Vendors range widely in size. Newburyport, Mass.-
based Keiver-Willard Lumber Corp., which can run tens of
thousands of feet of moldings daily, offers imported tropical
hardwoods alongside stock sawn from New England species. But a
seller also might be a small landowner who has a woodlot to
thin out and a friend with a portable band-saw mill.
Builders can gain access to a
nationwide market of small suppliers.
Newport, Tenn., lumber dealer Tom Hames runs Possumneck
Lumber, specializing in Mississippi cypress shingles. Hames
deals with buyers large and small. "I'll sell you 200 square
feet or 200 semi loads," he says. "Obviously, I'd prefer to
sell the semi load. But you try to keep everybody happy. So if
some guy in California wants 300 square feet of pecky cypress,
I'll go pull it, put it on a pallet, take it to the trucking
company, and send it to him in California."
Builders can gain direct access to a nationwide market of
small suppliers. Evan Moore, of Evermore Custom Homes in
Dallas, has found WoodPlanet vendors to be a competitive source
of hardwood flooring for his houses. "I found a gentleman who
drives to Missouri, picks up a load of oak, and brings it back
to Texas and mills it. And I paid $2.50 at his location a
couple hours away, for the same thing they charged $4.15 for
here in Dallas."
Quality is also an issue, notes Moore. "In Dallas there are
only two or three places to get rough lumber. And typically,
they won't surface it." With suppliers he finds on WoodPlanet,
Moore says, "you can get surfaced four sides, straight line
rips, tongue-and-groove four sides, or whatever you'd
like."
There's a risk to doing business with strangers, though,
cautions Moore: "Until your order gets to you, you aren't sure
of what you have. That's kind of a nail-biter. But you can call
WoodPlanet back and say, ‘Hey, I didn't get the grade or
quality that I ordered.' And it only takes one or two bad
reviews, and no one will do business with that vendor any
more." Says WoodPlanet's Kaufman, "We always tell both the
buyer and the seller to do their due diligence before they send
out a check or accept an order." —
Ted Cushman
Incentives Sweeten
Energy Bill for Builders and Homeowners
If you were a student in the 1970s, you might remember
walking or riding the bus to school in the dark. Following the
1973 oil embargo, Congress extended daylight saving time
through the winter months of 1974 and 1975 in an attempt to cut
down on energy use. While subsequent analysis has proven that
the policy was sound, it was an unpopular experiment that ended
when oil prices stabilized. But with oil prices soaring once
again, Congress is reimplementing this tactic as part of the
newly signed Energy Policy Act of 2005, though on a more
limited basis. Starting in 2007, most areas in the U.S. will
begin daylight saving time three weeks earlier, on the second
Sunday in March rather than the first Sunday in April, and end
on the first Sunday in November, one week later than
usual.
As this timid one-month extension of daylight saving time
suggests, the final version of EPAct 2005 is filled with
compromises and concessions. The first major energy policy
initiative since 1992, it passed after nearly five years of
negotiations only after key stumbling blocks — such as
liability protection for makers of the gasoline additive MTBE,
and oil drilling in the Arctic National Wildlife Refuge —
were dropped. Also omitted were new vehicle fuel economy
standards, which most analysts agree are critical to reducing
dependence on foreign oil.
An economic nudge rather than a major course change, EPAct
2005 awards incentives and tax breaks totaling nearly $14
billion to boost the production of oil and natural gas and
encourage the development of new nuclear plants, while offering
smaller tax incentives to prod consumers into using
cleaner-burning fuels. Supporters point out that the new bill
establishes higher efficiency standards for a number of
consumer products and promotes the long-term development of
gas-electric hybrid vehicles and cleaner-burning coal, while
critics say the bill fails to address such key issues as the
rising cost of fuel and U.S. reliance on Middle East oil, and
weakens laws that protect the nation's air, water, and other
natural resources.
Despite its flaws, the energy bill does offer builders tax
incentives aimed at improving energy efficiency in new
construction. For example, a tax credit of up to $2,000 per
home is available when construction exceeds by 50 percent
standards set by the 2004 International Energy Conservation
Code for insulation, heating, and cooling. Manufactured homes
can qualify for a $1,000 tax credit when they exceed the
standards by 30 percent. Beyond that, the bill's vague language
makes it hard to pin down further details; Bill Prindle, deputy
director of the American Council for an Energy-Efficient
Economy, points out that many issues concerning the tax credits
remain unresolved, such as which standards will be used as
benchmarks and how to certify compliance. "I'm not sure how
that 50 percent savings will be calculated, but it doesn't look
like this is going to be an easy goal to achieve," he
says.
Meanwhile, homeowners making energy-efficiency improvements
will have an easier time of it, as long as the work meets 2004
IECC standards. They can receive a credit equaling 10 percent
of expenditures on energy-efficiency improvements (up to a $500
maximum credit), which includes such items as new windows and
exterior doors, insulation and other items related to the
building envelope, and heating and cooling system components.
In addition, both PV and solar hot-water heating systems are
eligible for a 30 percent tax credit (up to a maximum of
$2,000) on either type of system. As Prindle notes, the exact
formula and criteria for determining eligibility has yet to be
determined, but most incentives apply to work performed during
2006 and 2007.
For a summary of available tax incentives, go to
aceee.org/energy/legsttus.htm.
— Andrew Wormer
Faulty Faucet Floods
House
After a Washington state couple's home suffered water damage
from a leaking faucet, they sued the faucet's manufacturer,
Price Pfister, for losses exceeding $300,000. The damage
occurred when a lavatory faucet "turned itself on," sending
more than 17,000 gallons of water running out of a second-floor
bathroom into the rest of the home. But when the homeowners
went to court seeking $240,000 in personal property damages and
$75,000 in loss of value to the home, which was for sale at the
time, a federal jury rejected their claims and instead awarded
them $125,500, according to a July 16 article in the
Seattle Times.
A forensic engineer who examined the faucet blamed the deluge
— which occurred while the house was vacant and on the
market — on a bad casting. Price Pfister admitted
liability before the trial, but declined to identify the faucet
model or whether there had been any similar failures on other
faucets; the company had reportedly offered to pay nearly
$180,000 to cover repair work, cleanup costs, and other
expenses. Because liability was never at issue, the faulty
faucet was never admitted as evidence in the trial, so a motion
by the attorney for Price Pfister to preserve the faucet as
evidence in the event of future litigation was rejected by the
court. The faucet — presumably no longer in service
— remains in the possession of the homeowners.
— Andrew Wormer