A labor and material shortage will challenge Utah's construction industry in 2006, as building surges in most sectors of the state, according to industry experts.

Clifford Brewis, senior director of editorial operations for McGraw Hill Construction, said Utah's construction industry will see increases in 2006 in multi-family residential, retail, medical centers, schools, manufacturing facilities and highways.

"I'll tell you, the issue is not demand. The issue is not, is there enough work," Brewis said Thursday during a meeting with contractors in downtown Salt Lake City. "The issue is going to be, can we really deliver?"

Brewis predicted that single-family home construction in Utah would drop marginally in 2006, but he added that the state could set another home-building record if mortgage interest rates remain low. Brewis added that office building construction in Utah would likely show a decline in 2006.

Ken Simonson, chief economist for the Associated General Contractors of America, said the entire country is stretched thin in terms of rail and truck capacity in delivering materials.

"It is possible to see localized shortages of any number of materials," Simonson said. "Non-residential construction is going to have a growth year again."

Simonson noted that the U.S. will receive more cement from Mexico over the next three years. Last summer, cement shortages affected 32 states, including Utah.

In August, Gov. Jon Huntsman Jr. and three other Western governors asked U.S. Commerce Secretary Carlos Gutierrez to lift the tariff on Mexican cement entering the United States.

On Thursday, the Bush administration announced an agreement in principle that will allow much more Mexican cement into the United States. Under the agreement, shipments of Mexican cement will increase to 3 million metric tons annually, up from 1.77 million metric tons imported in the first 11 months of 2005.

Simonson said that many people blame the present U.S. material shortage on China's growth.

"In the case of cement it is the opposite," Simonson said. "Now that China is becoming an industrial power, they are building world-class cement plants near the coast and as a result are able to supply the U.S. market as well as their own."

U.S. dependence on foreign cement increased to 27 percent in the first 10 months of 2005 compared to 20 percent two years ago.

Yet, increasing cement imports from Mexico will not result in a dramatic reduction in price, Simonson said.

Darrell Whitney, president of St. George-based Western Rock Products, said his company has cut back concrete pouring operations to five days a week from six days.

"We're challenged with finding enough help to get the work done," Whitney said.

Besides cement price increases, Simonson said construction material costs have risen in a number of areas, including copper, which has risen 30 percent to 40 percent annually for the past three years; and PVC pipe, up 20 percent to 100 percent in the past year.

"Material costs in general, you are going to see a lot of volatility," Simonson said. "You may see some shortages again of cement during the heavy concrete pouring season and perhaps spot shortages of other materials if there are either natural disasters, problems at plants or transportation facilities."

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