Hurricanes Bring Price Spikes in Stocks, Construction Supplies
Driven by Katrina and now Rita, higher prices are rolling through the building and construction business, affecting both consumers and investors.
Even before Hurricane Katrina hit, aggressive buyers began bidding up the shares of Caterpillar Inc., figuring bulldozers and backhoes would be needed for the cleanup. Caterpillar stock is up almost 10 percent since before Katrina.
Storm warnings were sufficient to trigger higher prices for cement, wallboard, lumber, plywood, plastic pipe and other building materials, which have continued to rise.
Among the sharpest spikes: a 50 percent jump in the price of oriented strand board, the glued-together panels of wood chips that have replaced plywood for much construction.
If you're building a home or remodeling one, your materials budget could be hit as hard as your gasoline bills have been.
Building materials prices are rising not only because reconstruction will boost the demand for those products but also because production facilities along the Gulf Coast were knocked out by the storms.
As the prices of products have jumped, so too have the stocks of companies such as Georgia-Pacific Corp., Louisiana-Pacific Corp. and Weyerhaeuser Co., the nation's biggest suppliers of lumber, plywood and other wood products.
But investors have been cautious about the stock of one Washington area company that seems an obvious beneficiary of the rebuilding work -- Lafarge North America Inc., the largest supplier of cement in the United States and Canada and a major producer of concrete, wallboard and rock for construction.
With its headquarters in Herndon, low-profile Lafarge is the North American offshoot of the world's biggest cement manufacturer, Lafarge SA of France. The French parent owns 56 percent of Lafarge North America, which has operations in every Canadian province and all but a handful of states.
Lafarge stock spiked more than $3 a share to just under $69 on Aug. 31 after Katrina stormed ashore but had receded to $63.72 by the close of trading Friday.
Lafarge is both a beneficiary and a victim of the storms. It has three cement terminals in the New Orleans area that were hit by Katrina and closed down.
A cement barge that had been tied up at one Lafarge facility was swept away and ended up sitting in New Orleans's devastated Lower Ninth Ward.