Other commodities being affected also: Cement, plywood. We're paying over $16 now for 7/16" OSB, that we used to get for les than $4.
China is building the three gorges dam...the largest dam project in the world.
Here's an informative article:
http://msnbc.msn.com/id/5139156/
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Strong global demand puts cement in short supplyBy Ryan Geddes
The Business Journal of Jacksonville
Updated: 8:00 p.m. ET June 06, 2004
JACKSONVILLE -- A construction boom in China and a host of global and regional supply chain issues have combined to create what analysts are calling the "perfect storm" of demand for building materials in the United States.
Due to regional production facility failures and a record-setting construction boom, Florida has been hit especially hard by the resulting shortages, causing price increases and project delays in Jacksonville and statewide.
Portland cement, a cement type used in most concrete products, is the latest in a series of building materials to jump in cost, following spikes in steel, oil and even plywood prices in recent months.
Analysts blame the cement shortage on both Chinese and American high demand for construction materials. According to the Portland Cement Association, a trade group, strong domestic economic growth led to double-digit cement demand growth in the fourth quarter of 2003. Because domestic cement producers had just emerged from a sluggish growth period, production capacity was too low to meet the increased demand.
Typically in such a situation, suppliers would turn to imports to make up the so-called "swing supply," but experts say the cement that would normally be available for export to the United States is being re-routed to China instead.
That country's numerous large-scale construction projects, including its preparations for the 2008 Olympic Games and its continuing work on the massive Three Gorges Dam, has resulted in a worldwide redeployment of shipping fleets to Asia.
"In an effort to maximize their returns, seaborne shipping companies have redeployed the shipping fleet to Asia, generating a shortage of carriers to the U.S. fleet," said Ed Sullivan, chief economist at PCA, in a May report.
Cement plants are running at flat-out production levels to meet demand, and the duration of the domestic construction boom has exhausted inventories, causing many suppliers to ration cement to customers.
"What I'm hearing now is not so much changes in pricing but that we are on allocation. It's basically about getting the right to overpay," said Granvil Tracy, president of American Land Housing Group Inc. The Miami-based developer is building The Strand at St. Johns Place, a high-rise apartment and condominium project on Jacksonville's Southbank. "This has already required us to do significant redesign of the buildings to eliminate any inefficiencies as it relates to concrete and steel."
In Palm Beach County, architects and county officials are trying to bring the new Scripps Research Institute in at its budget of $137 million, but cement and steel prices are making the task difficult.
"In a sense, we are between a rock and a hard place," said Jon Jackson, a Pittsburgh-based principal of Bohlin Cywinski Jackson, one of the two architecture firms designing the facility.
Prices for rebar, a steel product, are up 40 percent over a year ago and steel plate prices are up 31 percent, according to Engineering News-Record, a construction trade publication.
Quantifying cost hikes in concrete is more difficult because shortages are regional and recent, said Tim Grogan, senior economics editor for Engineering News-Record.
"We have heard reports of 10 percent increases in some markets," he said.
Cement prices in Jacksonville and statewide remain unstable, but industry analysts and developers say steel prices are peaking, albeit at high levels. Plywood and structural board prices are beginning to stabilize as well, but the same supply and demand issues facing the cement industry are plaguing the manufactured wood business.
According to Random Lengths, an Oregon-based forestry products industry trade publication, plywood prices averaged $545 per thousand square feet in the first quarter of 2004, a 107 percent increase over the same period in 2003.
Experts mostly discount the Chinese market as a reason for the tight plywood supply, citing instead high U.S. demand coupled with domestic supply chain issues. China has the highest number of plywood mills in the world -- nearly 2,000 -- and its ability to efficiently manufacture wood products is increasing, according to the Engineered Wood Association.
Trends in domestic wood panel production have been relatively flat in recent years, which spurred mill closures and reduced overall supply. Although reconstruction efforts in Iraq and Afghanistan have placed demand on worldwide plywood supplies, that demand is negligible, experts say.
Although plywood prices are on the rise, the material can still be more cost-effective than concrete and steel for some projects.
"We are looking at an office condo project right now that is just getting ready to start design," said Mick Stuebben, president of Jacksonville-based Stuebben Architecture Inc. "Normally we would have used a lot more concrete, but instead what we're looking at is more of a residential approach."
Stuebben said he was caught off guard by the cement price increases when a contractor working on one of Stuebben Architecture's current projects asked for an engineering change. The change would have allowed the contractor to continue working on a different part of the building while builders waited for cement, already weeks behind schedule, to become available.
"In the past we've seen spikes in prices because of construction booms. This one is a little more atypical," said Stuebben. "These issues are more based on the global economy than they are on a localized production boom. It's a little scary in some regards."
