Volatility in Construction Material Prices to Remain in 2022
May 29, 2024, 11:58 AM
TDD-global
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Volatility in Construction Material Prices to Remain in 2022
According to Linesight’s quarterly Construction Commodity Report and price forecast (based on interviews with nearly 160 industry experts across the globe), prices for construction materials are projected to remain high and volatile in 2022, despite a predicted stabilization in the market many thought would come to fruition in Q1.
Leading up to the end of 2021, many believed the pandemic-related supply chain issues would begin to ease off and allow for stabilization of the market, but the Russia-Ukraine crisis 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.
Despite the prevalent risks at play stemming from the ongoing conflict — and the materials pricing and availability issues these risks are likely to impose on the market — the US construction industry is expected to grow in 2022 by 4.5%, according to the US Bureau of Economic Analysis.
This recovery in the construction industry is anticipated to be primarily fueled by an acceleration of activity within the residential sector, which will only drastically increase the demand for the materials needed in that sector, most importantly concrete, cement, and other aggregates, further driving up the prices. Other contributing factors to the expected recovery include rising demand for new buildings and infrastructure in the life sciences, high-tech manufacturing, and public infrastructure projects.
In 2022, with prices and availability for essential construction materials like copper, lumber, steel, and cement continuing to remain unreliable, and directly impacting construction output, the total construction output for the US in 2022 will likely end up around $1.672 trillion. This would represent a year-over-year gain of 4.5%, after 2021 saw a total construction output of $1.599 trillion.
Further findings from Linesight’s report and price forecast include:
Prices for lumber saw the largest quarter-to-quarter price increase from 2021 Q4 to 2022 Q1 for the commodities tracked in the report, starting at $8.5/cu ft in Q4 of 2021 and rising 79.5% in Q1 of 2022. It is forecasted that lumber prices will continue to rise through 2022, mostly due to the increase in tariffs on Canadian lumber imports into the US, with an expected price of $16.1/cu ft.
Raw material prices for steel also saw a significant quarter-to-quarter price increase from 2021 Q4 to 2022 Q1, with steel rebar rising 4.7% and steel flat rising 8.9%. This trend is expected to continue due to the Russia-Ukraine conflict, which are collectively attributed with around 60% of the US’s imports of pig iron.
With construction activity ramping up, demand for steel will be high in 2022. 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.
Just as the acceleration of construction activity has greatly affected the pricing of steel, it is also expected to do the same for concrete, cement, and other aggregates, with increased demand for infrastructure being another major factor driving the prices up. Cement and concrete already saw a 3% increase in pricing from Q4 of 2021 to Q1 of 2022, and it is forecasted that they will climb another 7.7%, with a projected price of $139/t for cement and $144/cu yd for concrete in the latter half of 2022.
Other significant quarter-to-quarter price increases from 2021 Q4 to 2022 Q1 found in Linesight’s first-quarter Commodity Report included welded mesh rising 32.6%, diesel fuel rising 17.1%, and asphalt rising 8.1%.
“Despite the anticipated stabilization of materials costs, due to ongoing global issues, 2022 is expected to be another challenging year for the construction industry that will bring with it many disruptions, both in the supply chain and in the overall productivity of the industry,” said Patrick Ryan, executive vice president, Americas, Linesight. “But due to these continued disruptions, we are beginning to see major strategic changes in approach to procurement and supply chain management to minimize risk on construction projects. Many are looking to overhaul their approach, with some projects moving away from the ‘Just in Time’ model, others looking at reducing waste within the supply chain, building out back-up plans rather than being reactive to disruptions, building stronger and more diverse supplier relationships, and engaging early with all stakeholders to put in place strategies geared towards greater certainty regarding cost and schedule.
Leading up to the end of 2021, many believed the pandemic-related supply chain issues would begin to ease off and allow for stabilization of the market, but the Russia-Ukraine crisis 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.
Despite the prevalent risks at play stemming from the ongoing conflict — and the materials pricing and availability issues these risks are likely to impose on the market — the US construction industry is expected to grow in 2022 by 4.5%, according to the US Bureau of Economic Analysis.
This recovery in the construction industry is anticipated to be primarily fueled by an acceleration of activity within the residential sector, which will only drastically increase the demand for the materials needed in that sector, most importantly concrete, cement, and other aggregates, further driving up the prices. Other contributing factors to the expected recovery include rising demand for new buildings and infrastructure in the life sciences, high-tech manufacturing, and public infrastructure projects.
In 2022, with prices and availability for essential construction materials like copper, lumber, steel, and cement continuing to remain unreliable, and directly impacting construction output, the total construction output for the US in 2022 will likely end up around $1.672 trillion. This would represent a year-over-year gain of 4.5%, after 2021 saw a total construction output of $1.599 trillion.
Further findings from Linesight’s report and price forecast include:
Prices for lumber saw the largest quarter-to-quarter price increase from 2021 Q4 to 2022 Q1 for the commodities tracked in the report, starting at $8.5/cu ft in Q4 of 2021 and rising 79.5% in Q1 of 2022. It is forecasted that lumber prices will continue to rise through 2022, mostly due to the increase in tariffs on Canadian lumber imports into the US, with an expected price of $16.1/cu ft.
Raw material prices for steel also saw a significant quarter-to-quarter price increase from 2021 Q4 to 2022 Q1, with steel rebar rising 4.7% and steel flat rising 8.9%. This trend is expected to continue due to the Russia-Ukraine conflict, which are collectively attributed with around 60% of the US’s imports of pig iron.
With construction activity ramping up, demand for steel will be high in 2022. 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.
Just as the acceleration of construction activity has greatly affected the pricing of steel, it is also expected to do the same for concrete, cement, and other aggregates, with increased demand for infrastructure being another major factor driving the prices up. Cement and concrete already saw a 3% increase in pricing from Q4 of 2021 to Q1 of 2022, and it is forecasted that they will climb another 7.7%, with a projected price of $139/t for cement and $144/cu yd for concrete in the latter half of 2022.
Other significant quarter-to-quarter price increases from 2021 Q4 to 2022 Q1 found in Linesight’s first-quarter Commodity Report included welded mesh rising 32.6%, diesel fuel rising 17.1%, and asphalt rising 8.1%.
“Despite the anticipated stabilization of materials costs, due to ongoing global issues, 2022 is expected to be another challenging year for the construction industry that will bring with it many disruptions, both in the supply chain and in the overall productivity of the industry,” said Patrick Ryan, executive vice president, Americas, Linesight. “But due to these continued disruptions, we are beginning to see major strategic changes in approach to procurement and supply chain management to minimize risk on construction projects. Many are looking to overhaul their approach, with some projects moving away from the ‘Just in Time’ model, others looking at reducing waste within the supply chain, building out back-up plans rather than being reactive to disruptions, building stronger and more diverse supplier relationships, and engaging early with all stakeholders to put in place strategies geared towards greater certainty regarding cost and schedule.
September 20, 2024, 5:17 PM
