April 2023 Commodities
Lumber futures limber down, steel prices are still hot, and construction inflation dissipates…
In March, annual percent change in PPI for construction materials and services turned negative (-4.4%).
Earlier this month, lumber futures briefly meandered below $375 per thousand board feet (mbf); however, prices swiftly readjusted and are back in the low $400s. PPI for softwood lumber dropped again in March and is down nearly 50% compared to last year. Demand for lumber is subdued by a dormant homebuilding sector. Overall, new residential construction activity contracted in March, but data from the U.S. Census Bureau show a modest month-on-month growth in new single-family construction. Confidence among home builders ticked up for a 4th consecutive month since December, yet the recovery is sluggish due to dampened demand for homeownership. The average 30-year fixed mortgage rate is still above 6% meaning interest rate sensitive buyers are priced out of the market. Dear developers/owners…are higher interest rates pricing your projects out of the market? We measured your pain and built a program around it. Ask us about Project Rescue.
STEEL and others
U.S. steelmakers sap purchasing power out of the market due to robust domestic demand and a weak import market. Mills raised their minimum prices through a series of price hikes that started last November. Hot-rolled coil (HRC) futures are up nearly 48% year-to-date and trading above $1,000 per short ton (st). Domestic cold rolled coil (CRC) prices are up nearly 30% since the beginning of the year and are edging closer to $1,400/st. In March, PPI for some non-ferrous construction commodities inched up month-on-month; asphalt (+2%), precast concrete products (+1.3%), and plastic pipe fittings (+1.8). Prices of non-metallic mineral products stay elevated compared to a year ago; prestressed concrete products (+28%), cement (+17%), insulation materials (11%), flat glass (+11%), construction sand/gravel/crushed stone (+11%).
Construction material prices are in a state of flux. Unpredictable costs are predictably costly. Advice? Pay for impact, not input. A seasoned construction manager is capable of proposing strategies that inform design, optimize cost, and deliver on schedule. Ask us how we engineer value and de-risk development through Design Phase Management.
See below for a commodities snapshot, or click here for the full report.