Construction Material Costs Climb 0.9% in January

Construction material costs rose in January, while the amount contractors charge for projects remained flat. Price trends are cutting into already tight bottom lines and undermining chances for an industry-wide recovery in 2011.

Construction material prices jumped 0.9% in January, and nearly 5% overall during the past year, while finished building price indexes barely changed during the same timeframe. Construction costs also outstripped the producer price index for 

finished goods, rising 0.8% during the past month and 3.6% since January 2010.

Prices saw double-digit rates over the last 12 months for five key construction materials. Diesel fuel prices climbed 3.2% in January and 17.7% for the year; steel mill product prices rose 2.0% and 11.5% respectively; hot rolled boars, plates and structural shapes were up 2.2% and 14.3%; prices for steel pipe and tube rose 17.8% over the year and 2.8% in January; and prefabricated metal building prices increased 5.2% in January and 12.0% for the year.

Weak construction demand and more projects bidders are forcing contractors to hold down bid prices. The producer price index for new industrial and warehouse construction was virtually unchanged last month, inching up only 0.6 percent (industrial buildings) and 0.7 percent (warehouses) for the year. Similarly, new office construction prices were up a scant 0.2% for the year, despite a 1.0% January increase.

Other building material costs increases came from copper and brass mill shapes, up 3.3% in January and 9.9% for year, respectively; aluminum mill shapes, 1.0% and 9.2%; lumber and plywood, up 2.0% and 7.4%; and fabricated structural metal, 1.6% and 3.1%. There were a handful decreases, however, including brick and structural clay tile, down 2.4% in January and -2.4% over the last 12 months; and gypsum products,  down 3.3% for the month but up 0.5% for the year.