A growing demand for cement across Canada and the U.S. has both the energy and construction industries keeping a close eye on tight supplies.

While demand for the product in the U.S. isn't yet being mirrored in Canada, and industry officials downplay talk of shortages, some sectors could still feel the pinch.

"Demand is up almost 20 per cent year over year from 2004," says Ron Sills, manager of marketing and sales at Lehigh Inland Cement in Edmonton.

"Mega (oilsands) projects are also playing a role. We're trying to get everybody some (product), every market segment that we have has been impacted to a certain extent."

Jack Dagley, Business Edge
Lehigh Inland Cement marketing boss Ron Sills says jobs will be completed despite shortage.

While there are some marginal delays, he adds, the jobs will still be completed. "We just don't have the inventory backup," says Sills.

More than nine million metric tonnes of cement is produced annually in Canada. Ontario is the largest producer, at almost 3.5 million tonnes. B.C. produces just over a million tonnes, with production in the Prairies totalling two million tonnes.

"In particular, cement producers in Alberta and B.C. have seen double digit growth in all market sectors," says Michael Giroux, vice-president, headquarters, at the Cement Association of Canada.

"With unprecedented demand, where needed in Canada, producers have had to resort to short-term demand management."

The availability of cement in Canada, however, is nowhere near the situation in the United States, where only about 14 states reported having enough supply late this summer.

"It's a situation (in Canada) where the demand has increased significantly over the past couple of years," says Larry Baloun, vice-president of sales and marketing for B.C. at Lehigh Northwest Cement Ltd. in Vancouver. "But there hasn't been a shortfall."

"Our economy is just booming, the economy in B.C. is really healthy, our housing particularly and the commercial sector is now starting to come on. The situation is tight ... but I'm not aware of anyone who has gone short of cement anywhere in B.C."

Ontario is also noticing an increased demand for cement, says Paul Ostrander, senior vice-president of the Ontario region for St. Lawrence Cement Inc., whose headquarters are in Montreal.

Ostrander uses the term "sold out," but emphasizes that it does not mean there is a shortage. Cement companies, he says, look at the demand and their production, and match the demand to their production commitments.

"The position of our facility being sold out has been the position (here) for the last four or five years," Ostrander says.

"The potential for a shortage is there if the demand is higher or if we have a mechanical problem with one of our plants," he adds. "But we're putting additional capacity on to capture further growth as the market grows."

In Alberta, a superheated economy is cited as the reason for high demand. Lehigh Inland Cement's Sills says more people are moving to the province and driving housing starts, as well as more industrial projects coming online in all sectors.

Inland is already taking steps to increase its capacity, he adds. "We have identified some bottlenecks and we're going to pursue some further efficiencies and capital is in place in 2006 to provide for an expansion of as much as 10 per cent in 2007," says Sills.

"There will also be some increased capacity in 2006 as we're shortening our planned maintenance shutdown dramatically to allow us to build up inventory more aggressively over the winter."

Widely rumoured cement shortages in Western Canada as a result of devastating hurricanes this fall are just that, he adds - an urban myth.

"Certainly the hurricanes have had nothing to do with supply, at least in Western Canada. If you think about hurricanes Katrina and Rita, everything is pretty much in the cleanup stage. There will be no cement requirement until early in the new year."

Even then, cement from Western Canada will not be diverted to the southern United States, as it's simply not feasible to transport the product over such long distances.

"You don't get cement going that far," says Larry Baloun, vice-president of sales and marketing for B.C. at Lehigh Northwest Cement Ltd. in Vancouver. "Florida won't be impacting the cement situation in B.C., or Louisiana won't be impacting the Northwest (U.S, which Lehigh Northwest also serves)."

Mike Ritch, vice-president of marketing and sales at Lafarge Canada Inc., says that Western Canada has been isolated until recently from the severe cement shortages that have been experienced in the U.S.

But he calls the current situation of high demand a "one-off" and says Lafarge, with a presence throughout North America, is taking steps to ensure that its western region - the four western Canadian provinces, and the Pacific Northwest in the U.S. that it serves, along with Alaska - will have sufficient supply.

"We're presently moving product by rail from Ontario and Quebec to Alberta and we're also importing product from Kansas and other locations in the U.S. into North Dakota," says Ritch.

"Our plant in Exshaw supplies most of the North Dakota demand. By moving product, it frees up Exshaw capacity," adds Ritch. "We're looking forward to 2006. We've made arrangements to import significant volume into our Western Canadian region and free up capacity at the Western Canadian plants."

The strong demand for cement, Ritch says, goes back to 2004, when extremely healthy economies in Western Canada were driven by residential, commercial and institutional construction.

That led to reduced inventory levels in 2005, and this year, particularly in Alberta, has been a banner year with high demand in residential and commercial construction along with a booming oil sector that requires cement for downhole casings.

"Our guess is the demand levels in Western Canada are expected to remain high during 2006 and half of 2007," says Ritch.

The Canadian Construction Association is also hearing more from its members about the ongoing need for more cement.

"One of the reasons is simply because the construction industry, more particularly the non-residential construction industry, has been very robust this year," says Jeff Morrison, spokesman for the Canadian Construction Association.

"We're hoping that the cement industry will increase production because from what we see the high level of activity is set to go on next year."

Morrison adds while there are increasing challenges for association members and contractors to secure enough cement supplies, "we know of no examples or circumstances where projects have been cancelled or where delays have been a serious problem."

Meanwhile in the U.S., analysts predict that rebuilding the Gulf Coast region after hurricane Katrina will push cement consumption even higher then current record levels. Some experts estimate that rebuilding New Orleans will require at least four million tonnes of cement during the next four to five years.

They also say that the cement shortages are often regional in nature, though they can vary in length and severity.

The Hard Facts

* The most common combination used in making cement is limestone, clay and sand. These materials are processed in a rotating furnace called a kiln where temperatures reach 1500º C (2,732° F).

* This intense heat causes chemical reactions that convert the partially molten raw materials into pellets called clinker. After adding some gypsum and other key materials, the mixture is ground to an extremely fine grey powder called portland cement.

* Cement's uses are broad and it is in every aspect of infrastructure both below and above ground, including sewer, water systems.

* Cement is the critical ingredient in concrete and more concrete is used in construction than all other materials combined.

* According to the Cement Association of Canada, Canada's cement and concrete industries contributed over $6.6 billion to the Canadian economy in 2004 and employ more than 26,000 people from coast to coast.

(Laura Severs can be reached at laura@businessedge.ca)