Precast Inc. - November/December 2008 - (Page 16) materials (aggregates, cement and steel) that results in increased cost. Many customers do not understand the extreme inflationary environment we are operating in. What do you see for the future? Smith: Ideally, I would like to see the price stabilize. We have seen smaller increases recently that may suggest that prices are starting to stabilize. We have seen over a 50 percent increase in cost since the first of 2008 on our steel reinforcement. The other major challenge for our operations is the cost of cement and aggregates. About one-third of the cost of cement production is based in energy costs. As energy costs increase, the cost of cement is rising faster than inflation. For precasters, the ability to mitigate this cost with alternate cementitious materials is limited. This combined with increased delivery charges will increase the cost of our concrete and products. Aggregate reserves in some markets are limited, and this will drive already high prices higher. The availability of quality aggregates is a concern for our industry in the five- to 10-year horizon. 16 NOVEMBER/DECEMBER 2008 | PRECAST INC. [This steel crisis] will require new management skills to continue increasing market penetration of precast concrete products while maintaining the lowest cost structure possible. These skills have not been required for many years, and only the strongest, most competent players will emerge from these very difficult times. Hahne: We are currently in an economic downturn, which translates to an increase in commodity products while the market contracts. This will require new management skills to continue increasing market penetration of precast concrete products while maintaining the lowest cost structure possible. These skills have not been required for many years, and only the strongest, most competent players will emerge from these very difficult times.
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