US Construction Material Prices Hold Steady

In December, construction prices in America actually fell by 0.1 per cent and are up just 1.3 percentage points over with the same month one year ago.

In terms of specific materials, prices for metal-related products are generally low despite a modest uptick last month. Compared to December 2011, prices for iron and steel and steel products were down 8.4 per cent and 7.9 per cent respectively despite modest increases of 0.8 per cent and 0.9 per cent for the month respectively. Prices for non-ferrous wire and cable, up 0.6 percent in December, have fallen by 1.7 per cent and those for structural metal products and plumbing fixtures remain stable.

In energy, too, crude materials prices are down 4.5 per cent year over year despite a jump of 7.2 per cent last month.

The only problem area revolves around structural materials, where prices remain steady in asphalt, tar roofing and siding and are slowly rising for concrete but surging ahead in softwood lumber.

While saying that prices have generally been well behaved over the past year, however, Associated Builders and Contractors chief executive Anirban Basu expects higher cost increases this year, albeit with nothing to suggest any form of price spike.

“While 2012 was chaotic for a number of reasons, including uncertainty regarding the fiscal cliff, European sovereign debt and a variety of geopolitical issues, materials prices were unusually well behaved,” Basu says. “Monthly changes tended to be gradual and amounted to a year in which materials prices were up less than two per cent. One of the key aspects of 2012 was a softer Chinese economy, which served to dampen growth in demand for construction materials worldwide.”

Basu said 2013 promises to be different.

“China appears positioned to expand more than 8 per cent, the Japanese government recently introduced a stimulus package in excess of $200 billion and news from much of Europe has been a bit better of late,” he said. “The upshot is that materials prices may be positioned to rise a bit more rapidly this year, though as of now there is little reason to believe we will experience the types of price spikes that occurred prior to the Great Recession. December data provide us with a sense of what the near-term future might look like, with many categories such as steel mill products and crude petroleum rising on a monthly basis.”

Basu cautioned that the above scenario depends on the successful negotiation of issues surrounding the debt ceiling.

He warned that, should these issues not be resolved, a downshift in activity might cause a drop in prices and more price volatility.

By Andrew Heaton