Cement volumes on upswing, with imports soon to join mix

It is no surprise that U.S. exports of cement are on the rise with increased development in Latin America. But surprisingly, cement imports are also on the rise and Florida’s ports are the unexpected beneficiaries of this trade twist.

U.S. export volumes of cement are on the rise, with numerous indications that the outbound upswing will accelerate, while cement imports are anticipated to join the mix in 2016. Fueled by demand spurred by development throughout the Caribbean, the heightened export activity for the construction-related commodity comes as little surprise, but the expectations that cement will soon be coming by vessels into ports on Florida’s East Coast adds a new wrinkle that at first blush is a head-scratcher.  Strangely enough, U.S. environmental regulations are at the root of the move to initiate imports of white cement.  Thanks to the U.S. Environmental Protection Agency’s National Emissions Standards for Hazardous Air Pollutants, known for short as NESHAP, industry leaders such as Cemex USA are having to shut down some of their U.S. cement mill operations and look internationally for supplies to meet increasing needs within this country. Among those encouraged by this unusual twist is Alberto Cabrera, senior director of cargo sales at Port Canaveral, on Central Florida’s Atlantic Coast. “We’re very excited about that,” Cabrera said in reference to the initiative recently begun by Cemex to ready Florida port facilities to handle inbound cement in the coming year. Although Cemex USA – the nation’s largest supplier of cement and ready-mix concrete – continues to operate several Florida locations, overall growth, including that associated with major highway projects, is creating great demand in the Sunshine State. In addition to the continuing commercial and residential construction boom in Central Florida, Cabrera pointed to undertakings such as the Orlando outer loop roadway and the widening of Interstate 4. Cement to fulfill such needs, he said, can come not only from domestic supplies but also through Port Canaveral and marine terminals on Tampa Bay on the Gulf Coast. For Port Canaveral, this is particularly heartening, as there hasn’t been action in several years at the two sets of once-busy cement silos on the port’s property – one belonging to Houston-based Cemex USA (with its parent headquartered in Mexico) and the other to a unit of Irving, Texas-based Lehigh Hanson (part of German multinational company HeidelbergCement). “We hope it comes back in full force,” Cabrera said of cement activity at Port Canaveral. While Cemex is preparing to put its cement silo facilities at Port Canaveral back into use, Lehigh Hanson’s materials unit is concentrating its efforts at its Port Canaveral manufacturing facility, where a key component in strengthening cement – slag – is being ground at an accelerated pace. Slag, a byproduct of the steelmaking process, is shipped into Port Canaveral from Asia and, according to Cabrera, its import volume has nearly tripled this year. Part of the ground product then moves by truck to the nearby Florida East Coast Railway railhead for shipment to Georgia and other Southeast markets, while some goes by barge to the Northeast. Another indicator at Port Canaveral that cement demand is increasing is the steady flow of aggregates moving by Martin Marietta Materials through port facilities. When aggregates hit the ground in the construction process, they typically are followed by either cement or asphalt. Cemex USA’s director of government affairs and business development, George T. Williamson, who was port director at the Port of Tampa and prior to that managing director of the Port of Houston before entering the private sector in 2004, said about 90% of his company’s business remains domestic, with relatively little export activity, as Cemex operates plants in the Caribbean. Those Caribbean facilities now offer a source for the impending imports. Williamson said projections are for about a 7% year-over-year growth in U.S. cement consumption in 2016, with prices going up about the same amount. That demand prognostication nearly mirrors the outlook provided in September by cement trade association leadership. The market intelligence group of the Skokie, Ill.-based Portland Cement Association said it expects U.S. cement consumption to grow by 6.5 percent in 2016, following a 5% year-over-year rise in 2015. The report tied the growth to a 4.8% increase in U.S. construction activity in 2015, with expectations for an even stronger 2016. “Each of the three key sectors on cement consumption – residential, nonresidential and public construction – are experiencing growth,” according to the PCA outlook. “Typically, when all three sectors are positive, strong volume gains materialize.” According to the trade association report, despite volatility in equity markets and concerns about global growth conditions, PCA’s chief economist and group vice president, Edward Sullivan, said “the fundamentals in the United States are sound and should support sustained growth in construction activity.” “The U.S. economy is characterized by steady and strong gains in net job creation, low inflation, low interest rates, improving business and consumer confidence – all of which paints an optimistic near term outlook,” the PCA report went on to say. “While some sectors have been hurt by a strong dollar and low oil prices, these factors hold the potential of a growth dividend later in the forecast horizon.” Such forecasts are buttressed by reports like the Nov. 6 statement from the Associated General Contractors of America putting U.S. construction employment at its highest level since February 2009. Further fueling concrete expectations is the passage, at long last, of long-term highway funding authorization measures in both the House and Senate. Cement volumes already are gaining at Port Everglades, in South Florida’s Broward County, although they still lag substantially behind levels enjoyed prior to the Great Recession. In its fiscal year ended Sept. 30, 2015, Port Everglades handled a total of 702,599 combined tons of bulk and palletized cement, up 11 percent from 633,528 tons in the preceding 12-month period. But those numbers pale in comparison to the nearly 2.5 million tons of cement reported as moving across the Broward County port’s docks in the fiscal year ended Sept. 30, 2006. Alinda Montfort, communications manager in the business development division of Port Everglades, noted that the port’s billing records report all cement activity as bulk movements, even if shipped in palletized or other breakbulk manner.  When – or if – cement volumes will again reach pre-recession levels has yet to be seen, but Jesus Machado, president of Hialeah, Fla.-based Global Cement Products Inc., said he has seen export volume of Portland cement double this year compared with 2014. “The export business of cement has been exploding,” said Machado, whose firm engages in cement vessel chartering as a key part of its full spectrum of project management services. Machado said current cement shipping activity is at its highest level by far since the recession hit in 2007, with the product heading from South Florida to destinations throughout the Caribbean, including the Cayman Islands, Bahamas and Turks and Caicos Islands. “Right now, everybody wants to be a contractor, a developer,” Machado said of the Caribbean marketplace. But he cautioned that, due to the cyclical nature of economics and construction, there is always a question as to when boom will turn to bust. At the Port of Palm Beach, the starting point for many of the vessels chartered by Global Cement Products, expectations remain high.  Jarra Kaczwara, senior director of business development and communications at the Port of Palm Beach, noted that Gulf Stream Line Inc. and Heavy Lift Services have been handling cargo such as cement exports from the Palm Beach County port for a half century. “They have handled several similar-type shipments being exported to the Caribbean this year,” Kaczwara said. “They are not being exported for any one particular project but for several smaller building projects throughout the Caribbean.” For example, a recent shipment of 600 tons of Portland cement went first to Nassau, Bahamas, and then was broken up and put on feeder vessels to smaller islands.   “We are finding more and more that these type cargo shipments are either moving through the Port of Palm Beach or inquiring on rates and berth availability to do so for building and growth throughout the Caribbean,” Kaczwara said.  “When the Caribbean is building and growing, this is a good sign that the Port of Palm Beach and our tenants are assisting in this growth,” she added. Of the Cemex plans, Kaczwara commented, “Bulk cement imports by Cemex will most likely be one that will be pulling up the tail end at the Port of Palm Beach, as they have several plants within the state of Florida to service their needs locally.  “They have, however, been looking at the option of starting their bagging operation once again at the Port of Palm Beach and bringing cement via rail into their facility from their Brooksville plant,” she continued. “This is currently being researched. We are also working with Cemex to determine alternative commodities to be stored in their silos at the port.”   Meanwhile, on a more global basis, the present slowing of China’s economy does not augur well for worldwide cement demand.  China remains by far the leading country in terms of cement consumption, albeit that some of the product is not up to international standards, having utilized nearly 2.5 billion metric tons of the commodities in 2014.  That is almost 10 times the 264 million metric tons of consumption last year by No. 2 market India and more than 25 times the 89.1 million metric tons of cement used in the United States, which ranks third. Thus, even if Asian countries that are currently on better growth paths than China dramatically increase their use of cement, a small percentage drop in China’s cement consumption could precipitously reduce total global demand. As a general rule, cement, due to its bulky nature and low cost, may be expected to continue to be produced in big plants that are not only close to quarries but also proximate to users, with observers believing waterborne trade will continue to handle only about 3 percent of its global production for the foreseeable future.