Construction material prices rose 2.6% in February and are up 24.4% on a year-over-year basis, according to www.abc.org.
Nonresidential construction material prices rose 2.5% from January to February and increased 25.1% compared with one year ago. Softwood lumber prices are up 22.2% year-over-year and 5.2% from January to February. Iron and steel prices are up 50.3% year-over-year and down 7.3% for the month. Natural gas rose 65.1% from January to February, and crude petroleum climbed 13.7%.
“It will get worse before it gets better,” said ABC Chief Economist Anirban Basu. “Not only has Russia’s assault on democratic Ukraine created supply challenges in a number of categories, including oil and natural gas, but the reemergence of COVID-19 in parts of Asia and Europe is also poised to produce additional impacts. While many still expect commodity prices to decline later this year, the wait has been meaningfully extended by geopolitical conflicts and ongoing COVID-19 lockdowns.
“For contractors, this has the potential to put even more downward pressure on margins,” Basu continued. “It is likely that, as bid prices continue to soar, more project owners will choose to delay project starts. The current state of affairs also creates complications for public agencies considering when to start large-scale infrastructure projects. It is a challenging time to begin such projects, given the workforce shortages that remain and materials price inflation. Undoubtedly, some public administrators will decide to extend planning time, delaying project start dates.”
However, Basu said many projects continue to move forward.
“Construction backlog, as measured by ABC’s Construction Backlog Indicator, has remained stable for several months in the wake of rapidly rising materials prices,” he said. “It remains to be seen whether this stability can prove resilient in the face of additional, severe supply challenges.”
