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Building material prices have become the calm in America’s economic storm

Market Data

Building material prices have become the calm in America’s economic storm

Linesight’s latest quarterly report predicts stability (mostly) through the first half of 2023


By John Caulfield, Senior Editor | November 3, 2022
Lumber prices continue to recede as distribution channels open.
Lumber prices have been coming down since the first quarter of this year, according to the latest report on commodity prices released by the construction consultant Linesight. Image: Pixabay

Commercial and institutional construction spending is projected to be down 6.9 percent and 13 percent, respectively, in 2022, impacted by macroeconomic factors that include increasing demand for long-lead equipment, material shortages caused by supply-chain snags and the Russia-Ukraine war, and the instability of costs for fuel and labor.

That easing of demand has allowed key commodity prices to stabilize, and there is reason for optimism despite uncertainty about the health of the U.S economy that is only expected to expand by 1 percent next year.

This is the perspective of Linesight, a multinational construction consultant, which has released its Third Quarter Commodity Report for the United States. Patrick Ryan, Linesight’s Executive Vice President for the Americas, states that the “medium to long-term outlook remains positive, with [economic] growth expected in the coming years as inflation comes under control.”

The Report focuses on five key commodities:

Lumber, whose prices have been on a downward trend since the first quarter. Supply-side fragilities have eased, as post-flood mill inventory in British Columbia is rebuilding.

Cement and aggregates, whose prices have been affected by oil price turbulence. Linesight sees the slowdown in residential construction as easing pressure on this commodity’s demand, although that could also be negated by commercial demand spurred by the Infrastructure Investment and Jobs Act of 2021.

Concrete blocks and bricks, whose prices are waning along with residential construction demand that is tamped by rising mortgage interest rates.

Rebar and structural steel, whose prices had flattened during the previous quarter, and whose weakening future demand, especially from China, anticipates falling prices. However, Linesight also cautions that high energy prices continue to drive up steel’s production costs.

Copper, whose price declines of late have stabilized. Supply disruptions and the lack of investment in new mining operations continue to contribute to production shortfalls, and demand remains “resilient,” especially as the manufacture of electric vehicle batteries expands.

United States Commodity Report
Linesight's latest report examines why commodity prices are rising or falling, and how those movements vary by different regions of the U.S. Charts: Linesight.

 

Construction Materials Pricing

The Report prognosticates as well about pricing for asphalt, limestone, welded mesh, drywall, and diesel fuel. It also forecasts commodity prices by regions of the country, although the geographic variations are, for the most part, marginal.

Perhaps the most important issue right now affecting commodity prices, says Ryan, is mixed data on the economy. Despite two consecutive quarterly declines, “there are positive indicators being recorded to suggest economic resilience in some key areas,” such as the lowest unemployment rate in five decades, and the Federal Reserve’s aggressive actions to curb inflation.

Another bright spot is labor productivity in the U.S., which still outpaces Germany, the United Kingdom, Hong Kong, Taiwan, South Korea, and Japan.

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