Construction Material Volatility to Remain Through 2022

Another data point has arrived to suggest that anyone hoping for construction material costs to stabilize is queued up for another round of disappointment. The construction producer price index from the Bureau of Labor Statistics last month showed a range of CRE sector year-over-year increases from 20.1% to 21.7%. Lumber prices seem back on their way up.

So Linesight’s commodity report shouldn’t be surprising. The global construction consultancy “expects prices for construction commodities to remain high and volatile in 2022,” even though many thought that the first quarter of the year would bring stabilization.

Inflation, including the construction materials-specific type, continues to take a toll. Between the $8.50 per cubic foot price last quarter of 2021 and first quarter of 2022, lumber prices saw the largest quarter-over-quarter increase at a 79.5% jump, which would be $15.26. They are expected to continue climbing through 2022 until they reach $16.10, “mostly due to the increase in tariffs on Canadian lumber imports into the U.S.”

Also, as Linesight notes, increased geopolitical and supply chain instability set off by Russia’s invasion of Ukraine “has deeply affected the situation; both directly, due to the primary production of specific materials stemming from those countries, and indirectly, due to the conflict’s overall effects on the global supply chain.”

Steel prices were up, rebar increasing 4.7% and flat steel, 8.9%, from the end of 2021 to the first quarter of 2022. “This trend is expected to continue due to the Russia-Ukraine conflict, which collectively contributed around 60% of the US’ imports of pig iron,” Linesight wrote. Demand for steel will rise with increased construction activity. “This will probably be reflected in the price of the materials, as Linesight’s report predicts a year-over-year increase of 12.2% and 17.2% on steel rebar and steel flat, respectively, with a forecasted price of $1,177/t for steel rebar and $2,182/t for steel flat in 2022.” Welded mesh was up 32.6%.

The projected price for cement and concrete in the second half of 2022 is $139 per ton and $144 per cubic yard respectively. Concrete block and brick prices will continue to see elevated levels of 2021.

Even without the global disruptions from the war, copper would have been relatively tight this year. Now, electric vehicle and renewable energy projects will continue to push copper prices up. Last year, Linesight reports, on an annual average basis in 2021 they were up 51%.

And then there’s energy, with diesel having shot up 17.1% between the two quarters and a year-over-year increase of 24.9%.