The rapid decline in construction materials prices that began last October is now ending. The overall price index fell 10% through March (latest data). But market price reports since the March survey show a reversal to rising prices for many key commodities in April and early May. The price turnabout coincides with the end of the freefall in GDP and construction activity in the US, China and several other Asian countries. The economic freefall included massive reductions in manufacturing which contributed to the decline in prices for commodities used both in construction and manufacturing. Although now rising, prices will remain in the depressed range throughout 2009.

Market reports in the last few weeks show the resumption of rising prices in many key commodities:

Lumber: framing lumber firms are up slightly according to Random Lengths and futures prices have risen 10%.

Crude oil: the price has jumped from the $35/bbl. low point earlier this year to nearly $60.

Non-ferrous metals: all non-ferrous metal prices are now rising with the largest gains for copper.

Steel: overall steel prices have inched up very modestly but the price increases have been larger for rebar and other construction products.

The greatest price rise risk for the balance of the year is for materials with relatively little processing cost and relatively little use in manufacturing. The smallest price rise risk is for highly processed materials where labor contributes more to supply cost than raw commodities. Prices of all manufactured materials will be stable to only slightly higher through the end of the year while manufacturing demand and hence margins remain depressed. Price cuts for some items are likely.

Hence the overall construction materials price index is expected to be approximately stable during the late spring and early summer and then be rising but very modestly in comparison to the 2008 price increases. 2010 will see continued price rises at an accelerating pace. Worldwide materials demand will be rising throughout the year in both construction and manufacturing and today’s surplus inventories will have been absorbed by production cutback in 2009.