The curious case of concrete: how complications exacerbated Utah’s already dire concrete shortageJul 01, 2022 08:53AM ● By Deb Hafner
By Deb Hafner | [email protected]
When Peter and Allyson Fage purchased land in 2021, they were told it would take one year from excavating the foundation to hanging ornaments on a Christmas tree in their dream home.
The Fages hired an architect, approved home plans, and were on site when the first shovel of dirt was removed. But, when excavation was finished, the Fages were told there was no concrete available to pour their foundation. After waiting for updates and spending another Christmas in their rental house, the Fages decided to postpone construction on their home until 2023.
Of course, the Fages aren’t alone. Residential growth accounts for almost half of all concrete consumption in Utah, and while demand continues to rise, the National Association of Homebuilders cites that in 2021, more than 90% of builders reported delays and materials shortages.
Stephanie Hudson, a real estate agent with Realty One Group Distinction, said many people who were going to build have decided to build later and rent or purchase interim homes so their project doesn’t drag on for two years.
During the beginning of COVID in 2019, plants around the world started closing and laying off employees. From the emergence of COVID in 2019 up to March 2020 when the World Health Organization declared it a pandemic, more than 50,000 workers in the construction industry were laid off in Hong Kong because of a shortage of cement from COVID-related production suspensions across China. Europe faced similar layoffs and slowdowns.
Domestically, cement manufacturers were watching from afar as labor shortages spread across Europe and Asia, and anticipated similar nosedives in the US. Accordingly, they started to manage inventory down, expecting a recession but instead getting a surprise twist with an unprecedented boom in demand that spread across the country.
The concrete shortage that the Fages faced is being felt around the country, as demand has increased and COVID-related supply chain disruptions abound.
But, in Utah, a series of additional unfortunate challenges converged giving rise to a cataclysmic concrete shortage unlike any other in the nation.
Are we talking about cement or concrete?
The process to get concrete for foundations, driveways, pools, decks, walls, roads and other infrastructure starts with giant manufacturing plants that quarry, grind and cook limestone to form a rock-like substance called clinker. The clinker is mixed with gypsum and ground to a fine powder called cement.
Cement plants are tremendous—as long as a 40-story building laying on its side—and include quarry, mills and kilns. Cement production is limited by the amount of clinker that has been made. Once ground, the cement powder is so fine that one pound of cement contains 150 billion grains. It is considered gold in the ready-mix industry.
Cement powder is stored in silos, rail cars or tube-like portable containers called guppies. It is sold and transported directly to ready-mix companies who store it in their own silos and rail cars.
When a customer places an order with a ready-mixer, say for the foundation of a house, the cement powder is combined with water to form a paste. The paste is then mixed with aggregates like sand, gravel, or crushed stone, and the end product is concrete. Once the concrete is mixed, it is perishable and has to be used right away.
As Richard Thorn, president and CEO of Associated General Contractors of Utah, says, “Cement is the flour needed to bake the cake.” Without cement, there is no concrete.
Utah is home to two cement manufacturing plants that produce a total combined capacity of two metric tons per year.
Ash Grove, in Leamington, Utah, is owned by public company CRH, an international building materials group.
Holcim’s Devil’s Slide plant near Ogden is owned by publicly-traded Switzerland-based conglomerate Holcim.
Together, Ash Grove and Holcim sell about 80% of their cement to the three main ready-mix concrete suppliers in Utah: privately owned Clyde Companies’ Geneva Rock and Sunroc; Staker Parson (which happens to be owned by CRH); and public company Summit’s Altaview Concrete.
Receiving the remaining 20% of cement are the small handful of independently owned ready-mix companies spread throughout Utah.
Thrown into the amalgamation of high demand and supply chain issues, a sequence of events that started in 2019 have led the Utah cement market to its shortages today.
Challenge 1: Utah doesn’t make that much cement to begin with.
In addition to Ash Grove and Holcim in Utah, there is one cement manufacturing facility in Nevada, one in New Mexico, one in Wyoming, and three on the eastern side of Colorado. Idaho has no cement production capacity.
According to industry experts, cement capacity and production in Utah is already traditionally low as it is only home to two cement plants producing 2 metric tons (California, for example, has the capacity to produce over 13 metric tons per year).
Facing growing demand, geographically situated in the middle of other states also with relatively low capacity, all of which are seeing higher demand than in the past, Utah might just be the trickiest place to get cement in the United States right now, according to one industry expert.
Challenge 2: Reserves were already at the low end of capacity, and demand didn’t slow.
During the winter, cement manufacturers normally face a lull and use that time to shut down production for a month to perform routine maintenance. Once maintenance is complete, and the lull continues, they start to build reserves.
In Utah, a mild winter and a housing boom raised demand, and the reserves were drawn down instead of being replenished. According to Patrick Cleary, vice president of Cement Sales at Holcim, when Covid delays started ransacking Europe and Asia, Holcim started to manage inventory but then saw a boom in construction instead.
Data shows a steady increase in Utah cement consumption over the last 10 years, but the most rapid growth peaked in 2020, at a time when experts thought that consumption would weaken because of the pandemic.
There may be some relief in the future, says Ed Sullivan, chief economist at the Portland Cement Association, if residential construction demand decreases as interest rates go up.
Challenge 3: Utah can’t rely on imports to build reserves.
Depleted reserves and unprecedented demand in an already low-capacity environment saw manufacturers looking elsewhere to meet customer needs. Sullivan reports that total maritime imports to the entire U.S. West Coast from Asia in 2021 reached 5.73 metric tons, a staggering 54% increase from 3.71 metric tons in 2019.
An independent ready-mix company in Salt Lake City that has gotten cement from Ash Grove since the early 1990s said a few years ago, Ash Grove switched their supply from cement made at the Ash Grove plant to cement imported by Ash Grove from Vietnam.
Most domestic cement manufacturers rely on imported powder to build reserves or to sell to smaller ready-mixers, saving the domestic powder for continuity for their larger customers.
According to Sullivan, about 85% of U.S. cement imports are from six countries: Canada and Mexico account for 40%; China and South Korea around 20%; and the remaining 40% comes from Greece and Turkey.
To further complicate depleting domestic cement reserves, Turkish cement exports are being disrupted by the war in Ukraine.
As cement imports increased to meet domestic demand, a drastic rise in shipping rates, the global labor shortage, and a national truck driver shortage are making it difficult to get the imported powder to Utah from ports on the West Coast. (Many will recall recent news cycles about the ships sitting in California ports with no one to unload them.)
Thorn is optimistic that Utah does not have any truck driver shortages, and indeed the Utah unemployment rate is at 1.9%, one of the lowest in the country. But that doesn’t mean the state doesn’t feel the squeeze from national truck driver shortages, labor shortages and related shipping issues.
For Holcim, truck driver shortages have impacted the ability to transport cement domestically, according to Cleary, making borrowing reserves from other Holcim plants throughout the U.S. take a little longer.
Challenge 4: Nor can it rely on neighbors to help out.
In addition to foreign imports, cement manufacturers purchase powder domestically from other states. But when demand skyrocketed, states that would regularly share powder across borders halted exports.
A cement producer in Arizona reported they are selling to that state’s market only, and that they and their competitors are similarly sold out and can’t meet their own state’s demands. If Utah had previously been receiving cement from Arizona, that channel is now cut off.
The largest cement producer across the U.S. and Mexico is Cemex, a Mexican multinational building materials company. Cemex has 15 plants located in the U.S. West. To address shortages in the U.S., it has reopened two cement plants in northern Mexico that were previously shuttered. However, the two newly reopened plants will not be operational until the fall.
Challenge 5: There are some additives for concrete that decrease the percentage of cement mix, but those channels dried up.
Another piece of the puzzle has to do with a coal plant smoke stack byproduct called fly ash. Fly ash is a pozzolan, an ingredient that has no value on its own but adds value when used as an additive in another material.
When fly ash is mixed into concrete, the concrete becomes more dense and remains stronger over time. In some instances, adding fly ash is required by engineers on large infrastructure projects, like bridges.
Ready-mixers love fly ash as a cement extender because it can be used to replace a significant percentage of cement in concrete, decreasing costs and using less cement. Anytime a ready-mixer can replace some cement with fly ash, they do.
However, operation of one of the largest coal-fired power plants and fly ash suppliers in the Southwest ended in November 2019, when Salt River Project permanently shut down the Navajo Generating Station located on the Navajo Nation just east of Page, Arizona.
The fly ash supply was cut off for Utah and surrounding states and ready-mixers had to increase cement in their concrete mixture.
Further impact on fly ash came when the EPA considered classifying it as a hazardous material instead of byproduct, affecting buyer confidence, for who wants a hazardous material in their driveway or pool?
As channels to procure fly ash shut down, Clyde Companies (the owner of Geneva Rock and Sunroc) established Bridgesource in 2020, a fly ash company that has exclusive rights to ash from the Jim Bridger Power Plant in Wyoming.
Almost overnight in Ogden, according to residents who jokingly thought aliens had landed, two giant spheres, each 120-foot-tall fly ash silos, appeared. And though Geneva Rock and Sunroc would seem to be the natural beneficiaries of the pozzolan, Bridgesource opened distribution channels to other ready-mix companies, and fly ash sources came back online.
The pause in pozzolan availability, however, did not help an already drastic situation.
Challenge 6: On top of everything else, broken equipment and maintenance issues cause major setbacks.
The nail in the coffin for the Utah cement market was equipment issues at the Ash Grove plant. A gear box in its clinker mill was sent out for maintenance, and a temporary replacement installed, and that part quickly malfunctioned. Ash Grove had the original part returned before it was repaired, and removed the replacement part, but in the meantime cement production was offline.
In addition, regular maintenance required Ash Grove to rebrick one of the kilns, grinding production to a full stop.
Ash Grove is just now ramping back up, and has told ready mixers they are going to have production to 65% by midsummer. (At the time of publication, representatives from Ash Grove hadn’t returned phone calls or emails for comments.)
Holcim’s Devil’s Slide plant didn’t have any issues with maintenance, but its Colorado plant, from which it relies on reserves, had some unplanned outages, and combined with the truck driver shortage, it was a little more difficult to ship plant-to-plant.
As far as equipment goes, in the current climate, when something breaks or requires maintenance, the supply chain and labor shortage disruptions once again burden the cement industry, as parts, shipping of parts, and service on those parts is hindered.
Challenge 7: Allocations don’t help the small ready-mix companies.
For independent concrete installers, it’s increasingly hard to get concrete, with no end to the shortage in sight. “I ordered concrete for a project two weeks ago,” says one installer who did not want to be named, partly in fear of upsetting suppliers, “and they allocated 60% of what I ordered, and I am still waiting to get that.”
With reserves and production issues vexing the two cement manufacturers in Utah, and maintenance problems afflicting one, Holcim and Ash Grove put all customers on allocation in 2021.
In some instances, by the time installers ordered from ready-mix companies, they were getting 250 square feet of concrete at a time, spread out over weeks, when they were used to getting over 1,000 square feet within a day.
Even big infrastructure projects in the state were put on allocation. John Gleason, UDOT spokesperson, says the big projects that require concrete, the I-80 and I-215 Renewed project, the West Davis Corridor project, and the U.S. Route 89 reconstruction in Davis County, are being affected by the cement shortage.
Gleason said that UDOT employees have had to be flexible and ready to work when materials are finally available. Sometimes that means doing work during times they wouldn’t normally work. For example, early in June, the crews had to start laying concrete on the U.S. 89 project during the morning commute, work that would normally take place at night or early morning.
“Overall, we've dealt with challenges for the past several years like many industries, and we've come through it with minimal delays. This is a new challenge, and we have to make sure we schedule activities around availability to make sure we can keep our projects moving.”
After a while, UDOT could wait no longer, and received approval to purchase cement from manufacturers in Iowa and South Dakota.
There is an end in sight, but maybe hold off on that pool.
Holcim transitioned 100% production to a product that adds additional limestone to extend the powder portion of cement, and they are beginning to rollout their “eco planet product,” a natural pozzolan (not fly ash) that extends clinker (and comes with the added benefit of 30% reduction in CO2 emissions).
“Expanding what we have and reducing our footprint at the same time is a double positive for us,” Cleary said.
Paul Phillips, the owner of Ready Made Concrete, said, “I am the little guy in all of this, but it has been a battle for even the big corporations. We are all approaching the cement shortage differently during these challenging times, and it is a learning experience for us, and a way to become a better company. Some companies had to lay people off and we didn’t, and as a small company we were able to show our appreciation to our employees.” But, he added, “It took a catastrophic event to realize we rely on a single source, and now we see how vulnerable we are.”
Supply chain shortages and disruptions have been framed as part of the disturbance caused by the pandemic, with the federal government hinting that supply chains will go back to normal when COVID goes away, but that has not been the case, and the rebuilding of supply chains is slow going.
Facing an unprecedented demand with already low reserves, limited access to substitute materials, equipment failure and maintenance issues, global supply chain and labor shortages, problems with imports, and Utah’s geographic location in a cement desert, coalesced, not to form a perfect batch of soupy gray concrete, but instead a cement calamity, from which Utah may not emerge until 2023.