Changes in Canadian Construction Material Costs
Alex Carrick
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Seed Newsvine |
The quite-thorough Industrial Product Price Index (IPPI) report from Statistics Canada monitors price movements for a vast array of materials and products used in industrial processes. It provides a good means to examine some of the detail behind what is happening with respect to construction costs these days. As of April 2008, the most recent results for the relevant sub-groupings within the IPPI are examined in this story.
About half of the IPPI major sub-categories have more or less direct tie-ins with residential and non-residential construction activity. The most recent results for the relevant sub-groupings within the IPPI were as follows. (See also the special notes section at the end of this report.)
- Lumber and other wood products: -7.5% year over year (y/y) and -0.2% month to month (m/m).
- Furniture and fixtures: +1.2% y/y and 0.0% m/m.
- Primary metal products (steel and aluminum): -6.5% y/y and +5.9% m/m.
- Metal fabricated products (structural steel): +0.7% y/y and +0.4% m/m.
- Machinery and equipment (includes construction machinery and HVAC — heating, ventilating and air conditioning equipment): -4.2% y/y and 0.0% m/m.
- Motor vehicles and other transportation equipment: -8.8% y/y and +0.2% m/m.
- Electrical and communications products (wiring and lighting): -5.6% y/y and +0.1% m/m.
- Non-metallic mineral products (cement, concrete, gypsum and glass): +1.8% y/y and +0.1% m/m.
- Petroleum and coal products (includes gasoline and diesel fuel, plus paving material and shingles): +25.1% y/y and +8.0% m/m.
- Chemicals and chemical products (includes synthetic rubber, paint and insulation): +3.9% y/y and +1.1% m/m.
Further Sub-categories: Three Years Ago and Three Months Ago
The following looks at some of the more important construction component sub-categories. Furthermore, it applies a little more perspective to the results, comparing the present with three years ago (or previous peak) and with three months ago (i.e., a quarter ago).
Steel prices, in some product lines, are showing significant increases. Fabricated structural shapes have jumped in price to their highest level in this cycle and are +18.8% compared with only three months ago. Reinforcing bar prices are about even with three years ago, but have moved +2.3% versus three months ago. Further increases must be expected given the large hikes for iron and coal input prices that have been included in recent contract signings. These have been established mainly by Asian steel producers with Australian suppliers.
Aluminum structural shape prices (-8.3%) are down only slightly versus their highs which occurred in early 2007. Concrete and lumber prices (other than plywood and particle board) will be examined in the next section, since regional figures are available in the IPPI report.
Plywood prices have dropped 36% from their peak in 2004 and particle board prices are down 64% over the same time frame. Gypsum wall board prices are little changed from either three years ago or three months ago. The same can be said for another non-metallic mineral, glass.
Electric wire and cable prices are up 25% over the last three years. This is primarily due to the surge in the price of copper. Furthermore, the price change has continued to move gradually upward, with an increase of +1.7% in the latest quarter. However, lighting fixture prices have hardly budged over the past three years.
Gasoline and diesel fuel prices are up between +50% and +60% over the past three years. The pace of change has picked up even more of late. The year-over-year changes are +36% and +27% respectively. The world price of oil recently recorded an all-time high of $126 USD per barrel. Speculation has been fueling much of this increase, as well as a shift out of equities and into commodities. Once this phase passes, and it is clear that financial markets are safe to play in again, there will be some easing in many commodity prices.
Asphalt prices are up +42% over the past three years combined and +14% over the past year. Paint and varnish prices, however, are ahead by only +9% versus three years ago and are little changed from last year.
There has been little movement in prices for construction machinery and equipment (including earth-moving equipment) over the past three years. However, the mixing and paving equipment (for concrete and asphalt) category has seen prices move up a bit more smartly (+10%) over the last three years.
A Regional Perspective in Lumber and Concrete
The IPP report includes regional construction prices in a couple of key areas — lumber and concrete. The remainder of this report will look at regional changes for these two products.
Lumber: Lumber prices have been particularly soft due to the depression in the U.S. new home market. With respect to lumber prices, there was a definite cyclical peak in late summer 2004. Furthermore, its timing was consistent from one region to the next. Therefore, the following analysis of price change looks at current levels relative to that peak.
Since 2004, the regional changes for softwood lumber have been as follows: Atlantic region, -39.2%; Québec, -40.0%; Ontario, -34.2%; Prairie region, -50.9%; and British Columbia, -45.2%. Nor has the bleeding stopped. Versus three months ago, the declines have been between -1.0% and -3.0% in all regions except Québec (+1.0%), where a marginal increase was recorded.
Cement and Concrete: Portland cement prices are +10.6% over three years and +1.7% over the past three months. Concrete brick prices have been +8.8% (combined 3 years) and -0.4% (3 months). Ready-mix concrete Canada-wide has been +15.1% (versus 3 years ago) and +2.8% (versus 3 months ago).
Versus three years ago, regional changes for ready-mix concrete are as follows: Atlantic region, +7.9%; Québec, +3.0%; Ontario, +13.4%; Prairie region, +24.4%%; and British Columbia, +19.1%. This pattern clearly demonstrates the better construction market conditions that have existed in the West compared with the East over the last several years.
Versus three months ago, there have been the following regional price movements for ready-mix concrete: Atlantic region, 0.0%; Québec, 0.2%; Ontario, 0.9%; Prairie region, +6.2%; and British Columbia, +3.7%. The pattern of stronger construction activity in the West appears to be still holding.
