Year of havoc

Martin Giudici isn't popping as many antacid tablets today as he might have a year ago when cement shortages turned the world of concrete aggregate suppliers and contractors in Northern Nevada upside down.

While spot shortages of cement still pop up in some parts of the country, the availability of this necessary binding agent used to make concrete is looking much better in northern Nevada today.

But the lessons learned last year will likely forever change the way large commercial jobs are bid.

Giudici is president of Reno-based American Ready-Mix, one of the largest independent aggregate suppliers in the region.

The company, which has 75 trucks and employs some 120 people, endured what Giudici calls a "year of havoc" brought on by unparalleled demand due to the housing building boom, an unstable global cement supply and sudden price escalations.

During much of the 1990s, Giudici says his firm experienced no hikes in the price of cement.

This meant he could quote prices to contractors for work anticipated six to eight months into the future and be relatively assured those prices would hold."Last year,we had no price protection at all," he says."Our margins were significantly impacted." Most ready-mix suppliers break their customers into several groups.

The large construction firms that do high volumes of business on a regular basis and demonstrate they can pay their bills on time fall on what most would call the "A" list.

Smaller contractors with a good payment record might drop to the "B" list.

Such jobs are usually contracted through a bidding process several months in advance.

For the very small contractor who makes a living pouring patios, swimming pools and sidewalks for residential customers, the spot shortages in cement have often resulted in lengthy delays to get a ready mix truck to the site.And that has hurt everyone.

"You take care of your best customers first," says Giudici."But those small customers are very important to us, too, because your profit margin is higher.

But last year, all of our margins were hurt because we didn't have the supply."

Giudici explained that ready mix margins deteriorate these days when suppliers bid prices out more than two to three months into the future.

"A lot of your homebuilders will come to you in March and ask for bids out to December to lock in price,"he says."We used to do that but not anymore.We won't go out that far."

The scarcity of cement has been the result of several phenomena, not the least of which has been the extraordinary growth of construction activity in China.

It would be too easy to lay the blame for cement shortages at China's doorstep and it would not be totally accurate.

"China has impacted the availability of cement," says Giudici,"but so has our domestic demand.We still import nearly 25 percent of all cement into the U.S."

"Last year saw a classic supply-demand situation," he adds, noting that the number of ships transporting raw cement coming into U.S.

ports has declined."All U.S.

ports today require double hull container ships instead of single hull and that has only served to push transportation costs higher."

Major cement producing countries include Colombia, Thailand and Mexico.

But Mexico's CEMEX, that nation's largest producer of cement, has not been able to penetrate the U.S.

market because of high tariffs imposed a decade ago for violation of antidumping regulations." CEMEX is No.

1 in the world in ready mix concrete,No.

3 in the production of raw cement, and No.

4 in the production of aggregate," says Giudici.

He says his primary supplier for cement is Nevada Cement Co., which operates a large plant in Fernley.

Still, the company a wholly- owned subsidiary of Eagle Materials based in Dallas must rely upon imported cement that comes into its distribution terminal in Sacramento.

Cement is then transported by rail to Fernley.

Ed Sullivan, chief economist of the Portland Cement Association, says many of its members have plans to increase capacity through expansion or the construction of new plants over the next five to seven years.

Nevada Cement already has proposed building a new cement plant near Rye Patch in Pershing County.

In comments before the Bureau of Land Management and other interested agencies last year,Nevada Cement's president, Nick Stiren, said his firm wants to spend upwards of $300 million to build a new plant.

It would provide more than 100 jobs.

But the new plant would only be built if the company is satisfied there is sufficient limestone and water that would allow the plant to operate for upwards of 50 years.

In its present Fernley plant, the company in published reports says it has sufficient reserves to operate for another 13 years.

Craig Kessler, a vice president with Eagle Materials, says the permitting process for such a plant if drilling samples prove out would still take about three years, then upwards of another two years to build it.

"This industry is fragmented," he says.

"Because of the very low weight to value,we can only justify transporting cement out to about 150 miles.

That's why new plants are needed throughout the U.S."

Some contractors have complained about the unavailability of sufficient ready mix trucks to help them complete their jobs in a timely manner.

But one industry expert says that is not the problem.

It's a lack of available drivers.

John Madole, executive director of Nevada Chapter Associated General Contractors, understands.

"The federal government several years ago placed restrictions on the number of hours a driver can operate a large commercial vehicle," he says."When a driver hits 60 hours, he or she has to go home.

Some companies have literally had to shut down by the time Saturday arrived because all their drivers had reached that limit."

Says Giudici,"I'm in the office looking at the jobs scheduled for a Saturday that call for 65 trucks to be rolling, and discover I've only got 35 drivers who are eligible to drive.

That means 30 sites don't get their concrete that day.

That's how bad it was at times last year.

We're doing better now, but understand that this supply situation can change quickly."