After Huge Run-Up, Materials Costs Set to Moderate in Q1

At least one leading construction consultancy firm sees lower prices ahead for construction materials and also a surge in construction spending by 4.5% year-over-year overall thanks to efforts tied to the recent infrastructure bill passed by Congress.

Much of the inflationary pressure on prices was due to shortages prompted by pandemic-related supply chain issues, increased global demand, labor disruptions, and extreme weather. 

The findings are part of Linesight’s fourth-quarter Commodity Report and price forecast, based on interviews with over 160 industry experts across the globe.

Higher Costs Blunted Construction Output in 2021

In 2021, prices for essential construction materials such as copper, lumber, steel, and cement hit record highs amid shortages. These higher costs and delays for delivery blunted construction output to $1.626 trillion, compared to previous projections of $1.645 trillion.

While the US construction sector still faces many of these challenges, Linesight expects to see declines in prices in 2022. 

Prices for flat steel saw the most significant year-over-year increase in 2021 for the commodities tracked in the report, rising 131% to $1,486/MT ($1,348/t), driven by demand for durable goods like appliances and automobiles. However, while global and domestic production have ramped up, Linesight expects prices to decline slightly, flat steel by -0.8% and steel rebar by -0.7% in the first quarter of 2022.

Lumber prices surged 32% in 2021 to $9.9/cu ft due to labor disruptions and destructive wildfires in Canada and the United States. Demand, especially from residential construction, continues to be strong. Linesight expects lumber prices to climb moderately by 0.7% in Q1.

The price of copper spiked by just over 50% in 2021, to $9,451/MT ($8,574/t) from production issues in China and Peru and increased global demand. However, as the supply chain normalizes, Linesight sees prices declining by 2% in the first quarter.

Current Costs, Volatility, Remain High

Justin Brown, President & CEO, Skender, tells GlobeSt.com that he anticipates that some of the challenges around supply shortages will subside this year, but that some volatility will remain.

“Our teams are continuing to prioritize flexibility and risk mitigation, and work proactively to meet project needs, Brown said. “Overall, we’re very bullish on 2022. There is still some uncertainty in the economy, but the construction risks are tolerable and quantifiable, and our pipeline of new projects is strong.”

Jeff Taylor, managing director, Digital Risk, tells GlobeSt.com he’s still seeing higher costs today.

“Our construction and developer contacts continue to voice concern about the effect of high construction material costs, particularly that of lumber, on housing supply and do not anticipate any alleviation in the immediate future due to persistent supply chain complications and labor shortages,” Taylor said.

Currently, the hardest hit items are metal-related—anything from reinforcing to structural steel to a pre-engineered metal building, Barry Wurzel, president of Wurzel Builders, LTD, tells GlobeSt.com. “Additionally, lighting, plumbing fissures, and electrical wiring are the most volatile, primarily from manufacturing and the combination of lack of access to supplies and high shipping expenses,” Wurzel said.