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U.S. construction activity continues to improve. Private construction, the larger component of the industry, is up with few exceptions. Led by apartments and condos, housing is one of the fastest growing sectors. The Fed will keep interest rates low for the next two years, a policy that helps single-family housing. Despite the rising construction activity, increases in material costs have generally been modest due to slow demand outside the U.S. In 2012, construction materials increased 1–1.5% in the U.S.; another 1–2% increase is expected in 2013.
After a seven-year slide, lumber may have finally ended its downward price trajectory. Its cost is rising faster than overall materials costs due to the housing recovery. Prices are up 6% from a year ago but still down 21% from September 2004. Last year at this time, the components of concrete products were up 2% while the price of the finished product was up 5%. Now, we have a reversal – the components are up 4.5% but finished concrete products are up only 3%. Steel is now 12% off its high of 2008. Non-domestic demand has subsided, forcing the closing of some mines. Steel prices will be flat for 2013.
Aluminum sheet spiked to record levels in Q2 of 2011 and then started a downward dive. The price of this volatile product is down 3% this year but up 15% since 2004. Copper has lost some of its recent gains after losing 40–50% of its value in 2008, gaining 80% in 2009, and hovering at record levels in Q4 of 2011. Copper’s price was flat in 2012 and likely to remain so in 2013, although uncertain demand makes a projection difficult.
