The new year has begun with price increases and announcements of more to come for steel, copper, aluminum and diesel fuel. As one construction executive told the Institute for Supply Management in its January survey of nonmanufacturing purchasing managers, “Pricing pressures are starting to heat up.” Although there were also multiple price hikes in early 2004 and 2008, the increases this year do not look as if they will be so widespread or extreme.
On January 10, Nucor announced it was raising structural steel prices $65 per ton, effective on February 1. This followed five recent increases in sheet steel prices totaling $200 per ton since November 4. Another $60 increase is “in the works for late January or early February,” one steel buyer told AGC. Nucor also listed fuel surcharges of 23 percent for trucking and 14.5 percent for rail shipments, effective on February 1, as a result of rising diesel fuel prices.
Copper futures broke $4.40 per pound for the first time in early January. The spot price on the 10th was $4.25, up 24 percent from a year earlier.
“Prices for aluminum have skyrocketed 38 percent since July,” the Wall Street Journal reported on the 11th. “Aluminum prices—currently hovering around $2,400 to $2,500 a metric ton—are expected to rise to $2,700 a metric ton in 2011.”
The national average retail price of on-highway diesel fuel rose for the sixth straight week to $3.33 per gallon, the Energy Information Administration reported on Monday. That was 45 cents, or 16 percent, higher than a year ago, and the highest level since October 2008, when prices were retreating from an all-time high of $4.76 per gallon the previous July.
All of these materials are in demand worldwide and for multiple uses. In contrast, and unlike some years last decade, prices of materials that are supplied domestically and used mainly by construction—asphalt, concrete, gypsum and lumber—have stayed tame or even dropped recently.
As always, opinions vary about how large future price increases will be or how long they will last. But neither the U.S. economy nor activity in China, Europe or elsewhere appears to be vigorous enough to lead to sustained, across-the-board increases. There is ample domestic capacity to supply concrete and gypsum demand, and additional sources of copper and oil will be coming on stream the next two years.
At this point, it appears contractors should brace for periods of 6-to-8 percent year-over-year increases in materials costs overall. But by December, the weighted average increase for all materials should be more like 4 to 6 percent, not much above last year’s December-to-December change (which the Bureau of Labor Statistics will report on January 13).
- Industry Priorities
- Education
- News
- Connect
- Benefits
- Events
- Shop