Construction Economist Expects Punishing Price Increases in Katrina’s Wake

A leading construction industry economist expects Hurricane Katrina to punish the construction industry with large increases in the cost of cement, steel, copper, gypsum and other petroleum-based products. Ken Simonson, chief economist for the Association of General Contractors, Alexandria, Va., said even though prices for these core construction commodities have increased in recent months, Hurricane Katrina will push these costs much higher.

“Contractors use a lot of diesel fuel for off-road equipment, their own trucks, and the multitude of deliveries of materials and equipment,” he said. “Petroleum or natural gas is a key ingredient in asphalt, roofing materials, plastic pipe and insulation. And energy costs are built into the price of mining, milling, making, molding, and transporting metals, concrete and most other construction materials.

“Cement was already in short supply in 32 states and the District of Columbia last month,” Simonson noted. “The disruption to ocean, barge and rail transport from Katrina, and the loss of power to cement plants in the storm’s path, will cut further into cement supplies. At the same time, the urgent need to stabilize and rebuild roads, other infrastructure and buildings will increase demand for cement and other materials.

“We have been urging the Commerce Department and the Southern Tier Cement Committee to reach immediate agreement on a way to allow Mexican cement into the Gulf states without the punitive 55 percent duty now in place,” Simonson said. “Now the need for that cement is truly critical.

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