News

More Mixed Messages on Material Costs

September 4, 2008
Futures prices for commodities have continued their rapid retreat from July’s highs, but many products used in construction are still rising in price. On September 3, crude oil futures dropped to a five-month low. Copper, aluminum, nickel and natural gas all traded at or near the lowest levels since last spring. The Wall Street Journal reported, “In the U.S., prices of domestic hot-rolled and cold-rolled steel are off about 8 percent, or $80 a ton, in the past month.” Some of these raw-materials price declines are showing up in construction materials, but not all. Among the favorable changes: the Energy Information Administration reported that the average retail price of on-highway diesel fuel fell to $4.12 per gallon on September 1, a drop of 64 cents in just seven weeks and the lowest price since April. Liquid-asphalt prices also have dropped in some states, and structural and reinforcing-steel prices appear to have stopped rising in September for the first time all year. But September 3 also brought price-increase announcements from producers of materials as diverse as concrete, building-weatherization and tire-retreading products. Makers of ceiling tile and wallboard have also put increases into effect within the past three weeks, and announced more to take effect soon. The mixed pattern is likely to prevail for some weeks, or even months. Imports may help bring some prices down, now that European and Japanese economies are shrinking, the dollar is strengthening and the cost of ocean shipping has dropped. Some firms have cancelled fuel surcharges, and some plastics makers have dropped planned increases in light of lower natural-gas feedstock costs. But other producers are trying to recoup costs they swallowed for months. These disparate patterns may make it harder than ever for contractors to convince owners that material costs have not retreated, or have even continued to rise, while prices that owners see for themselves - such as for gasoline - are dropping. To send examples of price change announcements to AGC or to receive monthly tables of PPI changes, send an email to Ken Simonson at simonsonk@agc.org.
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