Tag Archives: Construction Materials

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Construction Material Costs Dip in October, but Outrun Contractors' Bid Prices

Construction contractors face a continuing cost squeeze, even though a key price index for construction materials dipped in October and showed only a moderate increase over the past year, according to an analysis of federal figures released today by the Associated General Contractors of America.

Association officials warned that recent and announced price increases may threaten the survival of some contractors.

“Although several materials retreated in price last month, prices in the past year have still outpaced the tiny increases in contractors’ bids,” said Ken Simonson, chief economist for the construction trade association. “In addition, some of the price drops have already reversed, or will soon, leaving contractors who have already submitted bids vulnerable to losses.”

The producer price index for inputs to construction — covering materials that go into every type of project, plus items consumed by contractors such as diesel fuel — decreased 0.4% in October, following increases of 0.9% in both September and August.

The index climbed 2.0% in the 12 months ending in October. Meanwhile, the indexes that reflect what contractors would charge for their work were largely unchanged and mostly rose less than materials costs over 12 months — 1.0% for industrial buildings, 1.4% for new office construction, 1.5% for schools, and 2.6% for new warehouses.

Simonson said prices for essential construction materials were mixed in October. The price index for diesel fuel rose 2.3% in October and 12.6% over 12 months. Prices for copper and brass mill shapes climbed 2.8% in October and 4.7% year-over-year.

In contrast, the index for steel mill products dropped 1.9% for the month and 8.5 % for the year. The index for lumber and plywood shrank 1.8% in October but was 6.2% higher than a year ago. Indexes for gypsum products and insulation materials both fell 0.7% for the month but rose relative to October 2011 — by 14.1% and 5.5% respectively.

“Many of these price changes appear to be short-term,” Simonson said. “While retail diesel prices have dropped 15 cents per gallon in the past three weeks and copper futures have declined, steel, gypsum and even concrete suppliers have announced hefty price hikes for December or January. As a result, contractors who have already bid to install these materials at fixed prices may be headed for losses, and even bankruptcy.”

Association officials said declining public investments in infrastructure and businesses’ reluctance to commit to investments in the face of the “fiscal cliff” are forcing contractors to keep bids low. “With so few projects to bid on, contractors are offering their services with little or no margin to cover materials costs,” said Stephen E. Sandherr, the association’s chief executive officer, noting that recent Census Bureau data showed a 4.2% drop in public construction spending and a slackening in the growth of private nonresidential construction between September 2011 and September 2012.

“Congress and the administration have to find a way to avoid the catastrophic increases in taxes and cuts in infrastructure spending that threaten many construction firms and risk putting their employees out of work.”

 

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Construction Material Costs Jump For 2nd Month In A Row

 

Price spikes for several key construction materials in September threaten to push contractors out of business, according to an analysis of federal figures released today by the Associated General Contractors of America.

The recent surge comes despite mild year-over-year changes in materials prices overall.

“The latest surge in materials costs may push subcontractors and some general contractors into insolvency, following years of razor-thin margins and shrunken levels of activity,” said Ken Simonson, chief economist for the construction trade association. “Most contractors have no ability to pass on unexpected cost increases.”

The producer price index for inputs to construction — covering materials that go into every type of project, plus items consumed by contractors such as diesel fuel — increased 0.9% in both September and August, while the indexes that reflect what contractors would charge for their work were largely unchanged, the economist noted.

The price increases for materials follow several months of declining prices, so that the year-over-year change in the index for materials was a “deceptively mild 1.7%,” he added.

Simonson cited rising prices for a variety of essential construction materials as responsible for the recent spike. The price index for diesel fuel jumped 5.7% in September, following a leap of 8.7% in August.

Prices for copper and brass mill shapes climbed 3.6% in September. The indexes for aluminum mill shapes and lumber and plywood each rose 1.1% in the latest month, while the price of steel mill products increased 1.0%.

In contrast, the price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, as well as the indexes for subcontractors’ work, were mixed for the month, Simonson noted.

The index for new industrial buildings decreased 0.2% from August to September, while the index for new school construction slipped 0.1% for the month. The indexes for new office and warehouse construction were unchanged, as were indexes reflecting prices charged by concrete, electrical and plumbing contractors for new, repair and maintenance work on nonresidential buildings.

The index for roofing contractors was the only nonresidential building index to show an increase for the month: 0.3%.

Association officials said inadequate public investment in infrastructure is a major reason contractors are unable to recover costs. “With so few projects to bid on, contractors are offering their services with little or no margin to cover materials costs,” said Stephen E. Sandherr, the association’s chief executive officer, noting that recent Census Bureau data showed a 3.5% drop in public construction spending from August 2011 to August 2012.

“Despite the tepid recover, the construction industry continues to suffer from tight margins and weak demand. That is why federal, state and local agencies must keep funding intact for construction, or they will have even worse problems with unemployment and shuttered businesses.”

 

 

Construction Materials

Construction Materials Prices Post Rare Year-Over-Year Dip In July

The cost of key construction materials dropped for the third consecutive month in July, pushing down year-over-year prices for the first time since 2009, according to an analysis of producer price index figures released today by the Associated General Contractors of America.

However, association officials warned that recent spikes in diesel fuel and steel prices may drive up the cost of construction again, and they urged lawmakers to invest in needed infrastructure projects promptly while prices remain low.

“This price decline may be the last, given the large jumps in diesel fuel and steel prices that have occurred or been announced since the Labor Department collected this producer price data in mid-July,” said Ken Simonson, the association’s chief economist. “If economic growth accelerates, we are likely to see an end to discounted prices for construction activity.”

The producer price index for inputs to construction — covering materials that go into every type of project, plus items consumed by contractors such as diesel fuel — decreased 0.7% in July and 0.6% from a year earlier, Simonson noted. The year-over-year decline was the first since November 2009, he added.

Simonson observed that falling prices for several key construction materials produced the latest monthly and year-to-year decreases. The price index for steel mill products tumbled 2.8% in July and 5.9% from a year ago. The index for diesel fuel fell 0.2% in July and 9.3% over 12 months.

The index for copper and brass mill shapes rose 0.5% for the month, but plunged 16% since July 2011. Aluminum mill products dropped in price by 1.3% over the month and 9.4% over 12 months.

A few materials posted substantial increases for the month and year, Simonson added. The index for gypsum products increased by 1.4% in June and 16% compared with June 2012, while the index for insulation materials climbed by 3.5% and 8.0%, respectively.

The price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, rose modestly both for the month and year-over-year, Simonson noted. The index for new industrial buildings posted a rise of 0.1% in July and 1.9% over 12 months.

The index for new office construction also rose 0.1% for the month and climbed 2.5% for the year. The index for new school construction was up 0.2% in July and 3.5% from a year ago. The price for new warehouse construction rose 0.5% for the month and 3.5% from June 2012.

Association officials called on Congressional leaders to complete action on long-delayed measures to invest in aging infrastructure like clean water systems. “Delaying infrastructure repairs will punish taxpayers and undermine economic growth,” said Stephen E. Sandherr, the association’s chief executive officer. “Putting off needed rehabilitation and replacement of worn-out structures will only force taxpayers to pay more for the same amount of work.”