Metal and diesel price increases push construction cost higher
Jim Haughey
 |
Seed Newsvine |
Construction materials costs jumped 2.1% in March from February to 6.5% above a last March. Most of the increase was due to soaring metals diesel prices. The current round of steel price increases hit the price index in March, accompanied by a jump in aluminum prices. Non-ferrous metal prices continue to rise rapidly.
Steel pipe prices rose 5.2% in March. Structural steel prices increased 2.5%. Non-ferrous pipe prices soared 8.7%, aluminum extrusion prices increased 5.2% and diesel pump prices jumped 24%. The prices for cement and concrete products as well as lumber prices were about steady with some items posting a price cut.
The surge in metal prices is the expected consequence of recently very low inventories, the falling $US and double-digit demand growth elsewhere in the world. The diesel price surge resulted from the same factors plus higher environmentally mandated production and distribution costs. The pace of price increases will ebb in April or May for both metals and diesel but he price tags will keep rising, especially for metals, well into 2008. Both commodities should be in the down phase of their price cycles by the end of the year. However, little pullback should be expected from current price levels.
The impact of rising costs on inflation is approximately proportional to the share of metal and diesel in the bill of materials for each project. Homebuilders experienced only a 1.0% increase in materials cost in March from February. The price index for single family materials is up only 3.3% from last March. But highway contractors saw a 4.0% price rise in March and now paying12.8% more for materials than a year ago.
Higher materials inflation means that the construction spending and starts data in current dollars is weaker than it first appears to be.
Construction Materials Inflation – January 2008
| Percent Change in… | ||||
| 1 month | 3 months | 12 months | 3 years | |
| Construction Commodities | ||||
| Dimension Stone | -2.8 | 1.0 | 0.4 | 5.0 |
| Cement | -0.3 | 0.1 | 3.2 | 24.5 |
| Asphalt Paving Mixtures and Blocks | 0.6 | 3.2 | 3.9 | 50.1 |
| Construction Sand, Gravel & Crushed Stone | 1.2 | 4.1 | 7.9 | 28.8 |
| Softwood Plywood | 0.2 | -4.4 | 2.9 | -15.2 |
| Hardwood Lumber | 0.2 | -0.1 | -2.3 | -4.2 |
| Softwood Lumber | -0.3 | -3.9 | -13.2 | -29.5 |
| Other Commodities | ||||
| Industrial Natural Gas | 4.2 | 9.0 | 4.9 | 23.2 |
| Plastic Resins & Materials | -0.5 | 1.4 | 12.8 | 9.8 |
| Insulation Materials | -0.4 | -0.8 | -3.7 | -0.5 |
| Iron & Steel Scrap | 1.4 | 26.5 | 16.0 | 81.3 |
| Iron Ore | 0.0 | 3.7 | 5.8 | 16.7 |
| Copper Ores | 9.6 | 13.3 | 23.5 | 139.4 |
| Copper Base Scrap | 7.0 | 19.4 | 28.2 | 149.5 |
| Manufactured Materials | ||||
| Gypsum Products | 2.2 | 1.6 | -18.7 | -3.4 |
| Diesel Fuel | 24.0 | 30.7 | 61.4 | 105.1 |
| Asphalt Roofing | 1.8 | 2.5 | 2.4 | 21.8 |
| Paint | -0.3 | 4.0 | 4.0 | 20.0 |
| Plastic Construction Products | -0.5 | 0.2 | 1.2 | 18.0 |
| Vitreous Plumbing Fixtures | 0.1 | -1.2 | -7.9 | -3.7 |
| Ceramic Tile | -0.9 | 1.8 | 4.6 | 5.8 |
| Flat Glass | 0.0 | 0.2 | -0.8 | 2.8 |
| Fabricated Building Steel | 3.0 | 4.0 | 6.4 | 15.6 |
| Hot rolled bars, plates & structural shapes | 2.5 | 8.1 | 10.9 | 24.9 |
| Extruded Aluminum rod, bar and other shapes | 5.4 | 3.8 | 0.4 | 18.6 |
| Architectural Metalwork | 1.1 | 1.0 | 3.3 | 11.4 |
| Metal Plumbing Fixtures | -1.5 | 1.0 | 0.9 | 13.1 |
| Builders' Hardware | 0.6 | 2.7 | 3.5 | 13.6 |
| Sheet Metal Products | 0.1 | 1.2 | 1.7 | 8.0 |
| Steel Pipe and Tube | 5.2 | 13.4 | 12.4 | 15.0 |
| Nonferrous Pipe and Tube | 8.7 | 20.0 | 39.8 | 131.0 |
| Building Brick | 0.8 | 0.5 | -0.7 | 11.3 |
| Ready Mix Concrete | 0.4 | 0.6 | 1.2 | 21.0 |
| Concrete Block & Brick | 0.0 | 0.8 | 2.3 | 15.0 |
| Prestressed Concrete | -1.5 | -0.6 | -0.6 | 20.1 |
| Precast Concrete Products | 0.2 | 0.7 | 3.3 | 14.9 |
| Concrete Pipe | -0.2 | 9.4 | 10.3 | 19.9 |
| Wood Kitchen Cabinets | 0.5 | 1.7 | 2.0 | 7.4 |
| Millwork (window,door, cabinet) | 0.4 | 1.4 | 1.7 | 5.9 |
| Engineered Wood Products | 0.2 | -0.2 | -4.5 | -9.7 |
| Laminated Plastics | 0.0 | -0.2 | 1.1 | 5.5 |
| Assembled Equipment | ||||
| Hand and Edge tools | 0.1 | 1.9 | 2.9 | 10.7 |
| Power Hand Tools | 1.5 | 0.8 | 1.5 | 1.9 |
| Appliances | 0.1 | 0.9 | 0.4 | 2.5 |
| Furnaces | 0.1 | 1.5 | 1.4 | 10.1 |
| Construction Machinery | 0.4 | 1.3 | 2.3 | 10.6 |
| Construction Machinery Rental (incl. oilfield equip.) | -0.1 | 0.3 | 0.8 | 12.6 |
| Trucks over 14,000 Ibs. GVW | 0.1 | 0.5 | 3.4 | 12.7 |
| Metal Doors, Sash and Trim | 0.0 | 1.3 | 2.3 | 10.7 |
| Summary | ||||
| Construction Materials (commodity level) | 1.0 | 2.3 | 2.7 | 10.2 |
| Inputs to Construction Industries | 2.1 | 3.6 | 6.5 | 18.5 |
| Inputs to NR Construction | 2.9 | 4.5 | 8.3 | 22.4 |
| Inputs to SF Construction | 1.0 | 2.1 | 3.3 | 13.2 |
| Inputs to MF Construction | 1.5 | 2.5 | 4.4 | 16.2 |
| Inputs to Highway & Street Const. | 4.0 | 6.3 | 12.8 | 33.7 |
| Inputs to Other Heavy Construction (indexes incl. instalation and overhead) |
3.1 | 5.3 | 9.9 | 23.6 |
| New Warehouse Building Construction | -0.2 | 0.2 | 3.4 | 19.8 |
| New School Construction | 0.4 | 2.4 | ||
| New Office Construction | 0.0 | 0.3 | 3.4 | |
| Production Index: Construction Supplies | -0.2 | -2.1 | -3.5 | -1.0 |
| Retail Sales: Building & Equipment Supplies | -1.6 | -2.7 | -5.9 | 5.8 |
Source: Producer Price Index, Bureau of Labor Statistics,
US Department of Labor, Federal Reserve Board, Census Bureau
