bld_0214_costtrends_constructionmaterials

FM Cost Trends

Jan. 22, 2014
Upward Price Pressure on Commodities; Manufactured Materials Are Stable.

For 2014, rising prices for construction materials are likely to be led by commodities rather than manufactured materials. In a sign that a long drought may be approaching its end, commercial building construction should be up by 5% this year, and housing construction up 10%.

Lumber prices, which will be driven by the increase in housing construction, are likely to be the leader. When spring arrives and homebuilding begins in earnest, lumber will increase quickly, as will gypsum products. Lumber prices are now approaching the prices recorded at the height of the bubble in 2004–2005.

Two years ago the components of concrete products were up just 2%, while the price of the assembled concrete product was up 5%. Last year both concrete components and ready-mixed concrete were relatively flat. Increases in 2014 should be marginal at around 1%. Steel is now 7% off its historical high in 2008. Foreign demand has subsided, and some mines are still closed due to lack of demand.

Aluminum sheet spiked to record levels in Q2 of 2011, then started a downward dive that still continues. The volatility of this product is great, as witnessed by the chart below. Overall, aluminum prices are down 6–7% from a year ago. After hovering at record levels in Q4 of 2011, copper has lost most of its gains. It was down 10% in 2013. Nevertheless, copper is still up more than 200% over the last decade.

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Note: All data is based on indices rather than unit or quantity prices.
Source: U.S. Department of Labor, Producer Price Index

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