But there is plenty of shut-in capacity that will open up if prices stay high enough. I expect materials costs to remain volatile and to rise, on average, faster than consumer prices. But I think a 2% to 4% increase is more likely in 2013 than the 5+% increases that were common in 2004 through 2011.
NAHB: Home building material costs have increased in recent months and have become more unpredictable even as housing production begins to see some small gains. The world economy has softened considerably so increased world demand is not the reason. The primary cause appears to be hesitancy in opening additional capacity on the part of building material producers.
Until there is greater certainty that a housing boom is under way and here to stay, producers do not want to pour funds into re-opening plants that will not be used to their capacity. As the recovery becomes more widely spread and consistent, material price volatility should moderate.
PCA: Lumber is still tied to residential home building. A 20% projected increase in that market has to be compared to how low it had dipped. Hence, the increase will likely have little impact on current depressed prices.
A byproduct of oil, asphalt is impacted by the global market and its price will continue to see upward pressure from demands in China and emerging countries.
IHS: More substantial price increases are on hold until the construction sector shows more sustained improvement. Prices for cement and concrete are expected to be flat in 2013, while the start of expansion in the housing sector will cause lumber prices to rise. Declining oil prices along with a bleak outlook for highway construction should serve to keep asphalt prices low in 2013.
ABC: Until recently, raw material costs have been falling, thanks to the global slowdown. However, there seems to be a growing interest among investors to purchase commodities, creating something similar to what happened in 2008 when commodity prices skyrocketed. Not to say they will skyrocket in 2013, but raw material costs are currently misbehaving and will continue to do so in the near term.
ARTBA: Material prices have been a big concern for the highway and bridge construction industry over the last decade. In part, this is because of volatile fuel prices, but also because getting new supply online can be a challenge. There are significant startup costs and regulations associated with opening new plants for processing cement, construction aggregates and other materials.