Lumber futures retrace, steel prices soar, and construction inflation rises…
Markets lament the Fed’s recent actions and grapple with spiraling interest rates. PPI for construction materials and services grows by nearly 1% in January, month-on-month.
Lumber futures dropped sharply towards the end of February after rising above $500 per thousand board feet (mbf) earlier in the month. Data from new residential construction, sales, and capital markets are suggesting demand for forestry products remains anemic. Housing permits and starts for single-family residences shrunk in January and mortgage rates rebounded in the last week of February. Demand for lumber hangs in the balance. North American lumber producers continue tapering sawmill capacity to offset soft demand and slumping prices. However, demand for rental properties grows firm in the wake of expensive homeownership.
The multifamily sector is capitalizing on opportunities. Robust data from the latest CPI print shows rent for primary residences is up 8.6% in January, year-on-year. Data from the Census Bureau reveals multifamily authorized permits are up 5.5% in January compared to the previous month, and projects under construction are up 24.3% compared to January 2022. One market’s pain is another’s gain.
STEEL and others
Metal markets are shining, and steelmakers are basking in the warmth of higher prices. Hot-rolled coil (HRC) steel futures are up nearly 30% year-to-date and edging close to $1,000 per short ton (st). The last time steel futures were this high was over 7 months ago. The resurgence of steel prices is due to ongoing price hikes imposed by steelmakers and buyers are biting. Both Nucor and Cleveland Cliffs announced a $100/st hike on their HRC products this month, effectively raising their price floors to $1,000/st. In nonmetallic mineral markets, prices are pumping. Compared to last year, PPI for prestressed concrete products is up +31%! PPI for cement products rose 7.7% and concrete bricks increased by 4.7% in January, month-on-month. But the steepest monthly rise in PPI was in asphalt which inflated by nearly 22% in January.
This is just a glimpse of how the Infrastructure Investment and Jobs Acts can and will impact the prices of construction materials and availability. If your structural framing system is hampered by rising costs, we can help you explore options. Ask us how we can optimize it.
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