This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

Go to Alex Carrick's blog home

Construction Industry Forecasts

Notes from Alex Carrick - Jul 22, 2009

Alex Carrick
Canadian Construction Material Cost Changes Diverge Widely (Part 1)

Based on the Industrial Product Price Index (IPPI) series published by Statistics Canada, the following sets out what has been happening, over the longer term and more recently, for some key materials used in the construction process. The information is current as of May 2009. The following shorthand is used: “y/y” is May 2009 versus May 2008; “q/q” is May 2009 versus February 2009; and “m/m” is May 2009 compared with April 2009.

Statistics Canada describes industrial product prices as being based on what Canadian producers receive for their product “at their front gate”. According to the composite index compiled by Reed Construction Data-CanaData from the IPPI series, total construction material costs are currently -7.9% y/y, but they are essentially flat q/q and m/m.

(1) Sand and gravel (+1.0% y/y; 0.0% q/q; and 0.0% m/m). Year-over-year sand and gravel prices were quite stable at around +4.0% from mid-2002 until early 2006. Then they started climbing faster, topping out at +11.0% year over year in late 2007 and early 2008. Since that time, they have shown a good deal more stability.

In fact, the price of sand and gravel has changed little in the past year and a half, according to Statistics Canada’s survey respondents. This is good news for public bodies planning to build roads and highways as part of their infrastructure spending initiatives.

(2) Cement (+3.3% y/y; -0.1% q/q; and -0.1% m/m). There is a fair amount of stability in cement prices. The index figure moves up in discrete jumps, mainly at the start of each year. The year-over-year percentage change consistently rings in between +3.0% and +4.0%. It occasionally moves higher, but that will only be for a month or two and will relate to a timing anomaly with respect to implementation dates, current year versus previous year. The latest year-over-year change in the cement price index is +3.3% and the actual level of the index has been flat for the past five months, since January.

(3) Ready-mix concrete (+1.3% y/y; -0.1% q/q; and +0.8% m/m). Ready-mix concrete prices were between +6.0% and +7.0% year over year from early 2006 through the fall of 2008. They have moderated to +1.0% to +2.0% year over year in all of the months of this year so far. The moderation in sand and gravel prices has been a contributing factor.

(4) Iron ore (+17.5% y/y; -7.6% q/q; and -6.0% m/m). This is one of the key components in the making of steel. It has experienced moments of extreme volatility in price. Chinese steelmakers have sometimes signed aggressive contracts in order to firm up supplies. This has been necessary to ensure that steel is available for massive capital projects being undertaken by the Chinese government. The year-over-year change in price has spiked on two occasions in the recent past, in 2005 (+40.0%) and again in the fall of 2008 (+55.0%).

Most recently, the recession around the world has taken some of the steam out of iron ore prices. But the Chinese economy appears to be heating up again. And a big part of that nation’s stimulus package consists of ongoing and additional infrastructure work.

(5) Concrete reinforcing bars (-34.6% y/y; -10.3% q/q; and -2.2% m/m). Year-over-year rebar prices peaked at +60.0% in 2004. That was when China first made its presence felt on the world stage by drawing in raw materials and driving up commodity prices. Rebar had a secondary peak in mid-2008 at +30.0% year over year. The price has been tapering off since then and is now down by about one-third versus year-ago May. The recession and the dearth of privately-financed non-residential building projects is the cause.

(6) Structural steel shapes (-10.1% y/y; -16.5% q/q; and -1.7% m/m). The pattern for structural steel prices has been quite similar to that shown by rebar as outlined above, with a surge in 2004 (+50.0% year over year) and another only-slightly smaller one in the fall of 2008 (+35.0%). Moving to the present (i.e., May 2009), structural steel prices are now -10.0% year over year, which is less of a slide than for rebar, at -34.6%.

I’ll pick up this discussion of construction material costs in my next blog entry.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.


Email

RSS Feed

» back to blog home

Member Comments

Post Your Own Comments 
» Not a member? Register now to become one. Otherwise, login to post your comments on this article.

Read Other Recent Alex Carrick Posts

10/12 - Latest Economic Nuggets: Mid-October 2012
10/04 - Auto Sales Set a Blistering Pace in the U.S. and Canada
09/18 - Canada’s Energy Future is Assured, Right? Think Again
09/14 - Latest Economic Nuggets: Mid-September 2012
09/06 - Auto Sector Labor Relations will Play a Role in Construction Outlook
08/30 - Raucous Behavior in the Party Room Next Door
08/13 - Latest Economic Nuggets: Mid-August 2012
07/31 - Canada’s GDP Advanced a Timid 0.1% in May but Support Will Come from Better U.S. Home Prices
07/19 - Finding the Pearls in the Latest U.S. and Canadian Economic News
07/13 - Latest Economic Nuggets: Mid-July 2012
07/04 - U.S. Auto Sales Continue Bullish While Canadian Incomes Languish
06/28 - Three Pivot Points for the World Economy - U.S. Housing, Europe’s Conundrum and Oil Prices
06/14 - Economic Nuggets – June 15, 2012
06/06 - Canada’s First Quarter GDP Growth Met Expectations, But What Comes Next?
05/30 - Ontario has a Backbone of Strength for the Decade Ahead
05/14 - Economic Nuggets - May 15, 2012
05/11 - Canada Rode a Second Consecutive Month of Strong Job Gains in April
05/04 - U.S. Employment Rose by a Mediocre 115,000 in April
04/27 - U.S. GDP +2.2% in Q1 2012 and Alberta led Canadian Provinces in 2011
04/18 - U.S. Inflation Low in March; Canada’s Central Bank Looking to Raise Rates

click here to update your log-in and member information

click here to maintain your company profile & view metrics