Materials costs spike higher in the wake of hurricane season

Construction materials costs are being abruptly pushed higher at the end of 2005 by the added demand and the reduced supply caused by the season's severe hurricanes. This ends a year of a steady price index, where rising fuel, chemical, plastics and cement prices were offset by falling lumber and steel prices during the year, ending in August.

The hurricane-related price spikes in lumber and steel will disappear by year-end. Lumber and steel prices will retreat to the mid-2005 level, but rebuilding on the Gulf Coast will keep prices from falling measurably in 2006.

The prices for cement-, oil-, and gas-based products will also return to their pre-hurricane level by year-end. The energy supply constraint will begin to loosen next summer, permitting slightly lower fuel and chemical prices. But the supply constraint for cement will persist longer.

Plastics prices will rise into 2007 due to the destruction of several Gulf Coast petrochemical plants.