ForConstructionPros.com

Over the past several months, many regions have seen a moderation in construction materials pricing. This has been a welcome relief after the extreme price increases seen for select commodities starting in 2004 and extending through much of 2006.

Unfortunately, it appears this relief will be short lived. At the Associated General Contractors of America (AGC) annual convention, Kenneth Simonson, chief economist, forecast a 6% to 8% rise in materials costs by the end of 2007. He cited greater volatility in petroleum, concrete and metal products as a primary factor.

Prices for these commodities are already starting to jump. As of February, the Bureau of Labor Statistics producer price index was already indicating a 7% increase in diesel fuel costs and a 14% increase in the cost of liquid asphalt.

Steel has seen significant price spikes. In mid-March, one major steel supplier announced a $50/ton net transaction price increase on all structural steel, bringing its total increase to $100/ton (+15%) since January 1 (AGC Data Digest, March 12-16, 2007). This is on top of an earlier announcement of a $55/ton increase by mills producing reinforcing steel.

"These steel increases are roughly as extreme as in early 2004, the year that kicked off a three-year binge of materials cost escalation," Simonson states. "This year, as in 2004, price hikes for other materials, such as diesel fuel and asphalt, are going to hit construction especially hard."