Thursday, January 27, 2005

Mexican cement needed to pave Texas

To prevent shortage, tariff on Mexican cement must end

January 27, 2005
David Hendricks
San Antonio Express-News Copyright 2005

Quarry companies are like the railroads these days. They both own a great deal of land. Both are critical to commerce and our quality of life. But no one likes to live near them.

As Texas grows, so will a dilemma involving the need for more limestone and other materials used to make cement, which in turn is needed for highways and building construction.

The clash between protecting property values and the need for more quarries is particularly acute in San Antonio and Central Texas because some of the best limestone in the world is along the Edwards escarpment.

So said Michael Stewart, president of the Austin-based Texas Aggregates and Concrete Association, in an address to the San Antonio Business & Economics Society at its monthly luncheon meeting Wednesday.

Quarry companies are finding themselves between a rock and a hard place, so to speak. As old quarries get mined out, the companies need to open new sites. Too many people, however, are living on or near limestone deposits between San Antonio-Seguin and Georgetown-Salado.

Quarries cannot be developed where there are houses, and Stewart said property owners - and their state representatives - are fighting proposed new quarries.

The big example now is in Burnet County, where state Sen. Troy Fraser, R-Horseshoe Bay, is siding with constituents who want to stop a quarry proposed by San Antonio-based Capitol Aggregates.

To Stewart, this is the wrong direction at a time when Burnet County is supplying the materials for the construction of Texas 130, which ultimately will provide a parallel route to crowded Interstate 35 between San Antonio and Austin-Georgetown.

When construction begins for the proposed Trans -Texas Corridor , a massive statewide highway system that will take generations to build, Texas will need to supply more limestone-based cement than ever.

Stewart predicted a cement shortage this summer due to heavy construction demand in Texas . The state usually imports about 15 percent of its cement needs, and in the past has relied on China. As China goes through its own construction boom now, it exports less cement.

Quarries further are being pinched by Union Pacific Railroad, which is cutting back by about half the number of cars being dedicated to limestone and cement-related products.

Union Pacific, which dominates the track routes used by the construction industry in this part of the state, is struggling to meet demand and has placed quarries low on its priority list for shipments, Stewart said.

That is turning quarry operators to rely increasingly on more expensive trucks to transport their products.

Ironically, there is a lower-costing source of foreign-made cement that could alleviate the coming shortage in Texas . Unfortunately, that cement is off-limits, thanks to a 15-year-old prohibitive tariff.

Mexico could be a competitive player in this market, but in 1990 the U.S. Commerce Department stuck a tariff, at times as high as 66 percent, on products from Monterrey, Mexico-based Cemex.

The Commerce Department took the action because of accusations that Cemex "dumped" its products in the United States to gain market share. Cemex no doubt sold its products at lower prices than U.S. producers did, but it is unlikely Cemex lost money by doing so.

Therefore, the anti-dumping charge has always been in doubt. Meanwhile, U.S. taxpayers have paid more than necessary for projects, especially highways, because the cost of cement has been artificially high.

In 1995, this column advocated ending the tariff because of changing market conditions, including the inability of U.S. producers to meet national cement demand even then.

Cemex has increased its U.S. production investments in the past decade and is even a member of the Texas Aggregates and Concrete Association now.

Because the association has members on both sides of the Mexico tariff issue, Stewart said, the association has no position. But he admitted that Cemex is unlikely to engage in dumping, no matter how it is defined, now that it has substantial U.S. operations.

Someone somewhere needs to bring political pressure to bear to end the U.S. tariff on Mexican cement. The case was political to begin with and always has been phony on its merits. To meet Texas ' growth projections, the cement market needs to be opened.