March 2023 Commodities
Lumber futures seesaw, steel forges higher prices, and construction inflation slows to a crawl…
While inflation in construction commodities moderates, the industry continues struggling with skilled labor shortages and rising wages. In February, PPI for construction materials and services grew at a sluggish pace; 0.34%, month-on-month.
After dunking below $400 per thousand board feet (mbf) in February, lumber futures nudged higher in March and currently swing in the low $400 range. Compared to last year, PPI in February for softwood lumber is down 45.1% and volatility of wood products has been trending down lately. Prices are stabilizing at pre-pandemic levels. The slump in lumber prices appears to have offset the pains of elevated interest rates and improved builder confidence.
Government data for new residential construction indicates projects are plowing ahead. The U.S. Census Bureau reported multifamily permits and starts outperformed single-family in February. New single-family construction permits increased by 7.6% and starts by 1.1% ( month-on-month), while multifamily permits and starts soared 24.3% and 24.1%, respectively. Developers forge ahead. The latest CPI print shows inflation in rent of primary residences is up 8.8% in February, year-on-year. If your project remains shelved, reach out and ask us about Project Rescue.
STEEL and others
Steel prices are on the rise again. Metal markets continue to glisten while sweating off lower prices that haunted steelmakers last year. Hot-rolled coil (HRC) steel futures are up nearly 40% year-to-date and trading above $1,000 per short ton (st). U.S. steelmakers regain pricing power and push spot prices higher through a series of hikes that started in Q4 2022. Federal spending programs such as the Infrastructure Investment and Jobs Act is expected to ramp up public works construction this year and boost demand for a litany of construction materials that may be in short supply.
In non-ferrous commodity markets, prices remain firm. Notable month-on-month changes in PPI are as follows: flat glass +4%, asphalt +3.7%, brick and structural clay +3.4%, copper wire and cable +3.3%, cement +1.1%. But it’s not all doom and gloom – February’s PPI print captured minor relief (month-on-month) in diesel -3.1%, plastic pipe fittings -2.0%, insulation materials -0.8%, sheet metal products -0.7%, and prestressed concrete products -0.6%. Expect prices of construction materials to ebb and flow in a sea of macroeconomic and geopolitical uncertainty.
See below for a commodities snapshot, or click here for the full report.