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Construction escalation forecast report and analysis for key U.S. locations and materials developed by Skanska USA Building's Project Planning Group.
Construction Market Trends
Q2 2021
03. Forecast map
05. Construction/Labor
02. Pricing
06. Materials
07. Contact us
01. Introduction
Download Report
04. Supply chain
The second quarter of 2021 is the sharpest period of construction escalation in the history of measured indices. For the past 30 years, ENR’s BCI index has reported an average increase of .24 percent per month or 2.87 percent per year. In the last ten-month period, starting in September 2020, the industry saw an increase of 9.33 percent with five percent of that in the last three months (April, May, June).
There are many contributing factors, however, most can be traced back to the global effect of COVID-19 on the manufacturing industry. Furthermore, there have been impacts from major climate events, lingering effects of trade tariffs, manufacturing capacity issues from rapidly expanding investment in mission critical and distribution sectors, and transportation challenges due to border and port restrictions and shortage of transportation resources.
If the price impacts weren’t severe enough, many product lead times have tripled or even quadrupled. This makes meeting project schedules extraordinarily challenging. While traditionally contractors can extend their pricing 90 days or greater, there are critical trades offering minimal or no guarantees as to the deadline validity of their prices.
Top Considerations for the Upcoming Quarter
Don’t take any product line for granted. Stay closely connected to the supply chain to ensure product delivery times stay on track.
Taking a wait-and-see approach will not prove beneficial if there isn’t a tolerance for a lengthy wait period.
Communication between our customers, subcontractors and vendors is critical to stay abreast of market conditions.
Unprecedented Escalation and Supply Chain Constraints Create Industry-Wide Challenges
4,435
Current material price index
+13.2%
Change from previous quarter
+25.3%
Change from previous year
Past one-year trend
Materials Index
12,112
Current Construction Industries Index
+3.1%
+5.9%
Construction Index
$3.06
Current Fuel price ($/gallon)
+2.6%
+47.2%
Fuel
$73.47
Current oil price ($/barrel)
+24.2%
+87.1%
Oil
$153.08
Current cement price ($ per CY)
+0.1%
+3.4%
Portland Cement
$1,481
Current standard plate price ($ per net ton)
+30.8%
+146.4%
Steel - Standard Plate
$1,390.62
Current plywood price ($ per MSF)
+18.5%
+123%
Plywood
$423.27
Current asphalt PG 58 ($ per ton)
0.0%
+5.2%
Asphalt PG 58
Cement
Asphalt
Steel
Click an index or material to view details
Q2 Construction Pricing Snapshot
6,877
Building Cost Index
+5.1%
+10.1%
Forecasting Local 2021 Construction Costs Across the U.S.
Miami/Ft. Lauderdale
Seattle
Portland
Orlando
Tampa
New Jersey
New York
Boston
Phoenix
Philadelphia
Washington D.C.
North Carolina/ Virginia
Cincinnati
Atlanta
Nashville
Houston
Dallas
San Antonio
Los Angeles
San Francisco
Click on the map locations to see construction forecast details for a specific city or region.
Phoenix, AZ
The local market continues to be extremely strong due to continuing demand surges in the mission critical/data center and high-tech manufacturing sectors. Phoenix metro is experiencing a large population influx, leading to a strong multi-family/housing sector that is consequently driving up construction costs and demand. A recent Bizjournals report indicates that the Phoenix market is outpacing the national average in construction cost increases.
Want to discuss the local market position and forecast? Connect with Andrew Rabasca, Regional Director of Preconstruction.
High-Tech Sectors Leading to Increased Construction Demand
Cincinnati, OH
All indications are that demand will remain strong for the forseeable future. Supply should begin to catch up to pre-pandemic status toward the end of this year, providing some relief to the market pressure. However, labor scarcity will continue to drive local subcontractor capacity. This has the potential to limit competition within our market and keep prices high.
Want to discuss the local market position and forecast? Connect with Jeff Smoker, Vice President of Preconstruction in Ohio.
Saturated Subcontractor Market Has Led to Bid Escalation Beyond Material Cost Increases
Want to discuss the local market position and forecast? Connect with Linh Le, Vice President of Preconstruction in Texas.
San Antonio, TX
Stable Yet Competitive
The San Antonio area continues to grow, expand and develop. Some market sectors such as healthcare, K-12 and higher education continue to be stable while hospitality, public civic and retail continues to recover to pre-COVID conditions. However, recent commodity increases have impacted pricing.
Dallas, TX
Growing Opportunities in Multiple Sectors
Local Construction Cost Forecast
North Texas has a significant amount of opportunities in the higher education, corporate relocation and mission critical sectors that are on-going or scheduled for starts in 2021 and beyond. With North Texas adding thousands of new jobs to the region, developers have millions of square feet either under construction or in planning stages to house the growth. From e-commerce hubs to office towers to data center facilities to apartment builidngs, the North Texas construction market is healthy. That being said, the bidding market is still competitive as both GC and subcontractors continue to build their backlog, generally resulting in good coverage in all trades. Commodity increases are impacting construction pricing.
Atlanta, GA
Material prices and lead times continue to increase monthly. On a positive note, lumber prices are leveling off (not continuing to rise) due to residential projects being put on hold. Drywall subcontractors in Atlanta are predicting a horizon on metal stud escalation in Q1 2022.
Want to discuss the local market position and forecast? Connect with Kayle Gastley, Senior Vice President of Preconstruction in Atlanta.
Material Prices Continue to Increase Monthly
Houston, TX
Construction Activities Increasing in All Sectors
Coming out of COVID, Metro Houston created 18,700 jobs in April, the third best April on record. West Texas Intermediate, the U.S. benchmark for light, sweet crude, has traded near $70 per barrel since June, a level not seen sice October of 2018. These factors, among other positive economical statistics has triggered a construction recovery in the Houston market. Escalation in commodities such as structural steel, bar joist, rebar, aluminum, PVC and lumber has greatly impacted the construction pricing.
Nashville, TN
Want to discuss the local market position and forecast? Connect with Adam Hicks, Vice President of Preconstruction in Nashville.
Record Year in Permitting and Growth
Metropolitan Nashville/Davidson County will set a record at $5.3B for new building permits issued (over 12,000 commerical and residential) for fiscal year 2021 (July 1, 2020 - June 30, 2021). This is extrodinary considering much of this time overlapped with COVID-19 lockdowns and significant market concerns. Surrounding counties making up the MSA are seeing equal growth in commercial and residential developments. Labor and material shortages are having a direct adverse effect on projects under construction and projects completing procurement.
Los Angeles, CA
Market remains busy with many opportunites for growth. Residential housing prices are not subsiding, which is fueling some of the demand on wages upward. Some long-term union contracts have helped to stabilize the escalaltion of the labor market. LAX has plans for multiple upgrades, expansions and infrastructure work. Higher education opportunities are continuing to present themselves in both the community college and the university systems. After an approximate year-long hiatus, healthcare is starting to come back on line with planned towers and infrastructure upgrades. All markets seem poised to continue their upward trajectory.
Want to discuss the local market position and forecast? Connect with Paul Hackett, Preconstruction Director in Los Angeles.
Local Markets on the Upward Trajectory
San Francisco, CA
The San Francisco Bay Area construction market demand has come back quickly. Material escalation and shortages are top of mind with all builders and clients. Availability of lumber improved over the past two months but many other commodities continue to experience pressure. See the national commodity trends section for additional insight.
Want to discuss the local market position and forecast? Connect with Mike Nelson, Preconstruction Director in San Francisco.
Northern California Market Recovering Faster Than Some May Have Expected
Portland, OR
Demand for new projects remains strong and the pipeline is robust. Clients are relieved at the apparent peaking of lumber prices and the forecast is very positive that similar trends could be in store for other commodities. Oregon fully re-opened without restrictions on June 30 and can now address some of the systemic issues that have been hampering investment in the city core.
Want to discuss the local market position and forecast? Connect with Steve Clem, Regional Senior Vice President of Preconstruction in Portland.
As Summer Heats Up, Historic Cost Growth Cools
Seattle, WA
The Seattle construction market remains strong with no apparent slowdown in the near future. The population continues to grow and house prices are rising annually in the 8 to 10 percent range. With the expansion of the mass transit network and the decision by many large employers to have satellite offices in addition to their in city campuses, we continue to see many opportunities in the market. Several large projects are still in the middle of construction: Microsoft Campus Refresh, Convention Center. Several others are working towards a close: Climate Pledge Arena, Seatac North Terminal and IAF. In downtown Bellevue, we are seeing a significant number of large commercial office projects now starting, which is primarily fueled by Amazon's desire to have a major presence there. The result of this activity is high demand and short supply of labor, which is driving up costs.
Want to discuss the local market position and forecast? Connect with Alan Dunbar, Regional Senior Vice President of Preconstruction in Seattle.
Strong Market with Robust Opportunities
Tampa, FL
Given the continued increase of new Florida residents, residential project developments continue to increase. We do anticipate rising construction costs in Tampa likely to continue until the supply chain stabilizes.
Want to discuss the local market position and forecast? Connect with Jeff Courtney, Preconstruction Manager in Tampa.
Increasing Residential Construction Contributes to a Shortage of Trade Labor
Palm Beach, Broward, and Miami-Dade County continue to be the hottest destinations for many Americans relocating from the north. With people moving in daily, the residential market continues to be high, with less growth than experienced in the previous months. Overall construction and inflation rates are expected to continue to be above normal levels. It is, also, anticipated that labor shortages will affect the South Florida construction market prices in the upcoming two quarters as the current unemployment rate for construction is at very low levels.
Want to discuss the local market position and forecast? Connect with Diego Espinosa, Preconstruction Manager in South Florida.
South Florida: One of the Hottest Relocation Destinations in the Country
Orlando, FL
Given the continued increase of new Florida residents, residential project developments continue to increase. We do anticipate rising construction costs in Tampa are likely to continue until the supply chain stabilizes.
Want to discuss the local market position and forecast? Connect with Brian Coakley, Director of Preconstruction in Orlando.
Residential Building Continues to Increase, Creating a Shortage of Trade Labor
North Carolina/Virginia
In both North Carolina and Virginia, construction employment rebounded to pre-COVID levels earlier this year. Looking ahead, the pipeline of new projects in the region remains very strong with a number of significant projects starting construction later in 2021 as well as large expansion projects for major tech and pharma companies looming on the horizon. While material price increases are expected to cool down headed into 2022, the project pipeline will continue to stress the local labor force, keeping pressure on prices for the foreseeable future.
Want to discuss the local market position and forecast? Connect with Will Senner, Vice President of Preconstruction in North Carolina and Virginia.
Strong Project Pipeline and Skilled Labor Shortages Expected to Continue to Pressure Pricing
Washington, D.C.
The local market is currently busy. Several projects that were previously pushed due to COVID are now being put on the street for pricing. We are still seeing price increases in PVC and copper piping, as well as metals and steel. Wood pricing has since come down.
Want to discuss the local market position and forecast? Connect with Apryl Webb, Vice President of Preconstruction, Washington, D.C.
Heightened Regional Activity, Particularly in Healthcare and K-12
Philadelphia, PA
Healthcare construction continues to be strong within the local market. We are experiencing added growth in the life sciences market, and are also seeing an expanded need for data centers in Pennsylvania. Higher education continues to be very slow with projects, but we expect this to pick up as we move out of the pandemic. Commercial construction growth is also down, but we do see a new demand for logistics and distribution centers picking up.
Want to discuss the local market position and forecast? Connect with James Lane, Vice President of Preconstruction in Philadelphia.
Construction Growth Slows as Owners Navigate the New Normal
New York, NY
Want to discuss the local market position and forecast? Connect with John Tamborino, Vice President of Preconstruction, Metro New York/New Jersey.
Market Continues to be Robust in Healthcare and Life Sciences Sectors
6 months - 1 year
1 - 2 years
The next six months will have increased activity in both the healthcare and life sciences sectors. We anticipate these markets to remain strong in the region for the next 6 months and into the first quarter of 2022. Additionally, projects are coming out in the higher education and transportation/infrastructure sectors. All markets in our region have been impacted by escalated material costs (ie. steel, concrete) and extended lead times on deliveries.
Market Continues to be Robust in Higher Education and Life Sciences Sectors
Next 6 months
Increased material prices for metals, lumber, roofing and ceiling tiles are being moderately offset by aggressive bidding from subcontractors that are looking to recoup losses caused by the pandemic. We are seeing an increase in Higher Education and Life Sciences sectors.
This map reflects local USA Building Project Planning Services team leaders’ opinions of market volume and capacity and is not based on published analytics or third-party forecasts.
Construction price inflation is/is expected to be above normal (3-5% per annum)
Market is stable and construction pricing/ inflation is within traditional indices (less than 3% per annum)
Connecticut
The Connecticut market has rebounded back to pre-pandemic volume in construction activity. Summer 2021 is currently projected to be in line with the year-to-year average from 2016-2019. This will be well below the peak activity levels that were seen prior to 2008. Most market sectors have seen a rebounding which should flatten out at the prepandemic levels. National supply chain issues are driving material pricing up and limiting availability, which has driven up the escalation in the area above 5%. The proximity to Boston and New York markets, which are seeing high levels of rebound, may drive a shortage of workers in Connecticut since workers travel for higher wages and overtime during Q3 and early Q4.
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction.
Back to Work!
Market is experiencing significant/abnormal construction price inflation (+5% per annum)
Boston/New England
The Boston market has rebounded quickly back to pre-pandemic volume in construction activity. Summer 2021 is currently projected to be the busiest, both, in terms of construction dollars and labor manhours, the region has ever experienced. Life Sciences, K-12 education and healthcare are leading the way in recovery, as they continued throughout the downturn at almost normal volumes. Corporate commercial and residential markets have picked back up and are now adding to the increased volume. In addition to national supply chain issues, we are starting to see some impacts to workforce availability and anticipate this will continue into Q4 2021.
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction, Boston.
Summer 2021 Projected to Be Busiest Yet
Want to discuss the local market position and forecast? Connect with Kayle Gastley, Senior Vice President of Preconstruction.
The Sacramento Area is also busy with several State of California Department of General Services (DGS) projects moving forward with progressive design-build being the delivery method of choice. The California Construction Cost Index increased by 8.6% over the last quarter alone.
Active markets include healthcare, biotechnology, mission critical, distribution facilities and government. Pre-COVID challenges regarding labor market availability is coming back faster than some have expected. Access to qualified labor for complex construction projects may be a challenge in the quarters ahead.
Miami/ Ft. Lauderdale
N. Carolina/ Virginia
Supply Chain Trends and Insights
The main factor stressing supply chains is surging demand coupled with significant supply constraints that include material, equipment, transportation and labor. The most notable surge in demand for construction material came from the residential market, however we are now seeing very high levels of activity in certain segments of the commercial construction market, such as data centers, warehousing and distribution.
Status Key
Stable/Consistent
Trending Down
Fluctuating
Trending Up
Roofing supply chains have been impacted by surging demand and the interruption in petrochemical processing along the Texas Gulf Coast. The most pronounced lead time impact is with polyiso insulation panels, which are out to 20 weeks in most regions and 24 weeks in some cases. Some manufacturers of multiple roofing product lines have elected to curtail certain ones in favor of meeting the demand of the higher volume products.
Lead Time
Price
Roofing Products
While plate-based steel shapes such as wide flange members are up significantly in price, the largest impacts to steel pricing and lead times revolve around joists and decking materials. Because of the significant building activity in warehousing, distribution and data centers, joist lead times are now extended out beyond 44 weeks and decking is out to 30 weeks. In addition, joist and decking prices have increased 300-400 percent.
Structural Steel
Click for further analysis
Steel based products such as metal studs and acoustical ceiling suspension systems are seeing the largest price increases in this category. Some metal stud producers have already announced additional ten percent price increases for both July and September of 2021. These additional increases will bring the total increase to over 100 percent since the Fall of 2020.
Ceilings, drywall, metal studs, flooring, paint, etc.
Architectural Interiors
Although lumber pricing continues to be at a multi-year high level, dimensional lumber pricing is declining. Pricing is down 50+ percent from its peak in May. One factor attributed to the decline is falling demand from retail sales and builders. Some builders are delaying or canceling projects because building materials pricing is just too high. The panel market (plywood, OSB, etc.) is finally starting to follow the downward trend that was first seen with dimensional lumber. Overall, panel pricing is down more than eight percent.
Wood-based Building Materials
Manufacturers are feeling the impact of increased steel pricing and are starting to pass on increases to customers. In addition, resin supply (for bench tops) is very tight and is starting to impact delivery timing. Resin supply is being adversely affected by petrochemical inputs and the long recovery process associated with disruptions along the Texas Gulf Coast.
Lab Casework and Fume Hoods
Demand for appliances continues to be very high. Some manufacturers are sold out for over five weeks. Relief is not expected until Q4 2021. Prices are expected to rise over the next 6-12 months by at least three to five percent. In addition to high demand, production is also being limited by the global semiconductor shortage.
Appliances
Overall price and lead time for this category is expected to be up slightly. Some manufacturers have reported flat pricing, others are reporting slight increases, between three and five percent. In terms of lead times, components shipped in from China are experiencing extended shipping times. Escalators and moving walk ways have been impacted the most, as this supply chain is more heavily dependent on manufacturing operations in China.
Elevators, Escalators, Moving Walks
Transportation and commodity costs are rising significantly, causing price increases across all pipe, valves, fittings, and plumbing fixtures. Because of shortages in raw materials for PVC/CPVC production, output has been slowed significantly. Some manufacturers are reporting lead times of five months for certain types of HDPE pipe. PVC piping manufacturers recently announced a price increase of an additional seven percent. Year-to-date average price changes for pipe are up 73 percent for PVC, up 44 percent for steel and up 51 percent for copper.
Plumbing
Overall demand for HVAC equipment is very strong and for some, far exceeds capacity. For example, air cooled chillers are being ordered in large quantities by data center operators as they may need 40-60 units per site. Manufacturers are also struggling to increase capacity in factories due to lack of applicants to open positions. Price increases of five percent have already been implemented with an additional, out-of-cycle increase of four to ten percent anticipated for July and August 2021
HVAC Equipment
Overall price and lead time for controls is expected to remain flat over the next several months. Concerns are emerging that the global semiconductor shortage will start to extend lead times in this category.
Building Control Systems
Strong demand for electrical gear continues to push out lead times for equipment to as much as 40 weeks. Commodity and manufacturing cost increases are driving five to ten percent price increases in July, with additional price increases expected in Q4 2021. Intelligent breakers remain on allocation due to semiconductor shortages.
Electrical Gear
Commodity prices have continued to rise and are up around 60 percent since the beginning of the year. PVC products have increased an additional seven percent since last quarter, and supplies remain constrained, driven by a surge in demand and manufacturing shortages. Any products that contain steel continue to have extended lead times and it is likely prices will continue to rise. Some relief has been seen in copper pricing.
Electrical Commodity Materials
Several manufacturers have published price increases ranging from four to nine percent since the end of Q1 2021.
Lighting
Spot rates for shipping containers remain high, rising an additional nine percent in May. Spot rates for a 40-foot container are up over 310 percent year over year. Increased shipments continues to be a problem at the terminals, which are faced with high volumes of shipments and port congestion due to labor shortages.
Transportation
COVID-19 PPE
Elevators, escalators, moving walks
Building Control systems
Electrical commodity Materials
Lead time and Price Snapshot
Click a category to view details
Wood Products
Lumber pricing is driven mainly by housing starts, which were on the decline the first couple of months this year. However, starts rebounded in March to 1.725 million, but have cooled slightly to 1.572 million in May. Overall, the housing market remains very strong and most housing market analysts predict strong starts through the remainder of 2021.
Steel has escalated dramatically since August of 2020. Since August, structural shapes have increased between 70 to over 100 percent. Because of the nearly year-long lead-times associated with joists, projects are being redesigned to castellated beams or steel shapes to improve lead times. Other projects are moving towards a phased GMP approach, where structural steel designs are completed first and can be procured, securing a place in the fabrication queue. Elevated pricing and lead times are expected to remain, with easing anticipated sometime in 2022.
Drywall
Drywall pricing has escalated steeply over the last 9 months. However, the frequency of announced price increases from manufacturers has slowed in recent months. Residential building activity has slowed a bit since peaking in March but remains at a very high pace, keeping the pressure on manufacturers. Manufacturers continue to supply the market on “Allocation” or Controlled Distribution, which is stretching out lead times. Although pricing remains high, there is some evidence of stabilization but going forward will depend on housing activity. Additionally, insulation products have experienced extended lead times. This is most pronounced with mineral fiber insulation, which currently have lead times out beyond 200 days. Rockwool is opening a new facility in West Virginia this fall, which is expected to offer some relief towards the end of the year.
Petrochemicals in PVC
Petrochemical manufacturers in the Gulf Region account for 80 percent of U.S. production, and their products are primary ingredients for PVC. Over the past year, production has been disrupted by a series of complications ranging from explosions, Hurricane Laura, and most recently winter storm Uri. Ultimately, 80 percent of the petrochemical production in the U.S. was impacted. As a result, the lost production is estimated to reduce total output for 2021 by 10-12 percent. Production is ramping back up, but there are still some raw material constraints; however, most of the operational issues are expected to be mitigated by the end of April. Prices of PVC have increased rapidly as well, and large distributors have implemented price increases of around ten percent in February, followed by another five to ten percent increase in April.
Mechanical and HVAC Equipment
HVAC manufacturers are starting to see delays in the supply chain due to increased demand and workforce constraints in factories. In particular, Electronically Commutated Motor (ECM) fan manufacturers have extended lead times to 26 weeks; galvanized steel price and lead times have significantly increased; and flex conduit availability is becoming a concern.
Electrical Gear and Materials
Lead time for low voltage switchgear (less than 5kV) has extended to between 30 and 40 weeks. In some cases, capacity to generate submittals is further extending procurement lead times. Busway lead times range from 15 to 20 weeks and medium voltage switchgear lead times are between 18 and 24 weeks. Strong demand is expected to continue through the end of the year with further price increases expected because of rising manufacturing costs, including workforce constraints and rising cost of steel, aluminum and copper.
Inland intermodal ports are heavily congested as well, and volume is up 7.7 percent from last year. Rail transportation is challenged with container shortages, chassis shortages across the network, and engineer and locomotive driver shortages. Some railroads have already implemented peak season surcharges, which typically have gone into effect around August. This typically coincides with shifting consumer demand at the start of the school year. Volume, then, remains high through the end of the year due to the holiday season in December. There is no sign of slowing, and this is expected to create additional strain on transportation at least through the end of the year. Project teams should factor in longer shipping times when determining release dates.
About Skanska's Strategic Supply Chain Team: Skanska’s Strategic Supply Chain Team leverages established relationships with major equipment and building material manufacturers to bring best value solutions to our projects and clients. Our direct relationships give us insight into the major supply chains feeding into the construction market. Since the outbreak of COVID-19, we have been working with our partners to closely monitor construction supply chain disruptions, lead times and impacts to market prices for materials and equipment.
To learn more about supply chain trends, reach out to Tom Park or Rob Cantando.
Below we provide details around some of the supply chain categories that are being stressed the most by high levels of demand such as – roofing, steel, wood products, drywall and mechanical/electrical equipment. We also explore the challenges presented by disruptions to manufacturing along the Gulf Coast caused by hurricanes and unprecedented cold weather. Disruptions to petrochemical-based processing continue to significantly impact the supply of roofing materials, insulation, resins, sealants, PVC, polymers, MDI and other chemicals used to manufacture many building products. We also include some of the current challenges in transportation – from a shortage of shipping containers, to capacity constrained ports of entry, to rising fuel prices.
The obvious question is when things may stabilize or return to some pre-pandemic levels of cost and schedule certainty? At present, most of the suppliers and manufacturers in our space are indicating continued price and schedule pressures well into 2022.
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Doors and Hardware
Lead Time and Price Snapshot
Trending Up Significantly
Semiconductors
Roofing
Roofing material lead times are extending dramatically. There are several material shortages that are causing this, most notably is methylene diphenyl diisocyanate (MDI). MDI manufacturing has been severely impacted because of chemical feed stocks that were disrupted along the Gulf Coast. MDI is used in rigid foam insulation and is also a key ingredient in binders, elastomers, adhesives, sealants and coatings. The result is roofing product manufacturers are struggling to get the materials needed to keep up with demand. Finished materials in the supply chain have been depleted and lead times are being dictated by how quickly manufacturers can produce and ship.
Lead times for semiconductors are notoriously long, with an average production cycle time taking around 12 weeks. Now lead times are extending further, and in multiple instances manufacturing lead times are reported up to 52 weeks. One of the key products impacted, at this time, is Electronically Commutated Motors (ECMs), which are used for HVAC, refrigeration, motion controls, and automotive.
Metal doors and frames manufacturers have just announced increases between ten and twenty percent as a result of escalating metals pricing. Hardware pricing increases are more modest – in the three to eight percent range. Project teams should be vigilant on delivery dates for electronic entry systems, card readers and keypads due to the global semiconductor shortage impacting lead times.
Copper prices have declined about ten percent from an all-time high in May of $4.90 per pound. This is caused by slowed growth in China’s economy, a stronger USD over the past two months, and rising COVID-19 cases globally. China also announced that it will sell 20,000 metric tons of copper at auction in early July in an attempt to help alleviate high prices. It is not likely that there will be long term relief on the price of copper. Top global copper producing nation, Chile’s, state-run mines were able to largely mitigate a planned strike in early June by increasing the wages of union workers. The wage increases, combined with a new bill being proposed by Chile to increase royalties on mining companies could keep the price elevated. In Peru, the second largest producer of copper, elections have caused uncertainty regarding copper prices. The presidential front runner has proposed royalties on copper sales in Peru, which could lead to additional price increases. The price of copper is currently expected to remain elevated throughout the year.
At the start of the pandemic automakers cut production, due to falling demand. At the same time, people who were in lockdown shifted their buying behaviors, and demand for handheld electronic devices and PCs soared. Chip fabricators quickly reallocated capacity to accommodate the demand surge. When the demand for automobiles recovered faster than anticipated, auto manufacturers were stuck, as production lines switched to other chips. Over the past few months, the shortages have gotten worse. Some customers are hedging their risk by double ordering quantities, which is further hurting supplies and recovery time. Lead times for semiconductors are notoriously long, with an average production cycle time taking around 12 weeks. Now lead times are extending further, and in multiple instances manufacturing lead times are reported up to 52 weeks. One of the key products impacted, at this time, is Electronically Commutated Motors (ECMs), which are used for HVAC, refrigeration, motion controls, and automotive. Other categories impacted include intelligent breakers and electronic entry system. Although there is some hope that we are beyond the peak of this crisis, the issue is likely to linger until at least, early 2022.
Hover over the chart to see exact figures
Skilled Labor Index and Common Labor Index
Overall construction unemployment rates fell to 7.5 percent in June 2021, down from 8.6 percent in March 2021. Construction employment changed little in June (-7,000). Over-the-month job losses in nonresidential specialty trade contractors (-15,000) and heavy and civil engineering construction (-11,000) were partially offset by a gain in residential specialty trade contractors (+13,000). Hourly wages rose from $32.16 in February 2021 to $32.86 in June 2021.
Architecture Billings Index
This Architecture Billings Index (ABI) demonstrates whether or not architectural firms are billing for or signing new design contracts. The construction industry feels the impact of this index with a 9-to-12-month lag time.
-50 =50 50+
Decrease in volume
Increase in volume
Neutral
Scoring:
Construction Spending and Dodge Momentum Index
Construction spending during May 2021 was estimated at a seasonally adjusted annual rate of $1,545.3 billion, 0.3 percent (±1.0 percent) below the revised April estimate of $1,549.5 billion. The May figure is 7.5 percent (±1.3 percent) above the May 2020 estimate of $1,437.7 billion. During the first five months of this year, construction spending amounted to $594.8 billion, 4.6 percent (±1.0 percent) above the $568.5 billion for the same period in 2020.
Construction, Architecture and Labor Indices
Spending
Labor
Architecture
The May 2021 score of 58.5 is one of the highest ever reported and indicates that even more firms are increasing their billings in May than in April 2021. Inquiries for new projects also remain high, and the value of new design contracts have reached an 11-year history high.
All U.S. regions have seen billings growth for three straight months. The strongest conditions are in the Midwest, as well as those firms concentrating in commercial/industrial projects. View the full May 2021 ABI report here.
Construction Materials and Commodities Pricing
The last two quarters have seen unprecedented escalation in most major commodity markets. While there were some small decreases in materials pricing at the onset of COVID, they were greatly offset by the escalations experienced in the past 3 quarters. Pricing for commodities from crude oil, to copper to hot rolled steel to polypropylene/ polymers to PVC, is up between 75 and 225 percent in the past 12 months. Lumber reached its peak in June but the past few weeks have shown a steep decline (in some cases 50 percent off-peak), largely attributed to residential builders pushing back projects since lumber was making projects untenable for sale.
Piping
Lumber and Wood
Metals
Oil, Gas and Fuel
Drywall, Gypsum and Insulation
Concrete and Cement
Steel and Aluminum
Pipe Producer Price Index
This chart shows a one-year trend of pipe producer price index. Polyvinyl Chloride (PVC) Pipe Weather related capacity disruptions in the Gulf Coast region resulted in doubling of PVC resin costs. The chief concern is availability and lead times. Copper Pipe Copper pricing receded for the first time in 16 months but is still more than 100 percent in that same time frame. Carbon Steel Pipe Price is continuing to rise as a result of demand outpacing supply. Lead times are extending, and mill capacity is still tight.
The average price of a gallon of gasoline is up $1.20 since the onset of the pandemic. While fuel costs are a contributor to on-site construction installation costs, their significance is much larger in the manufacture and transportation of raw and fabricated materials that are in-turn delivered and made part of buildings. These recent increases have been passed on to consumers by way of increased transportation and logistics costs. As costs of fuel and oil have been on the rise, so have costs of other goods that make up the global economy.
Aluminum Price continues to rise as demand from China is increasing steadily. Outlook for 2021 is higher pricing and a supply deficit.
Zinc Prices have decreased due to increased output in Chinese mines and China auctioning off reserve stock.
Nickel Prices have risen as demand from China increased and inventory levels have decreased. Prices will likely continue to rise.
Copper Demand for copper is still elevated but price has declined because supplies from South America have stabilized and China auctioned off some of their reserves.
Lumber and Wood Products
In late June/early July, we have seen the price of lumber recede significantly (as much as 50 percent in some products), leaving prices still well above pre-pandemic levels but offering some relief. The reduction seems attributable to improvement in production and supply chain, as well as pushback in the residential market where price points have begun to impact housing starts. We believe the receding lumber prices will be reflected in the August commodities data.
This graph shows a one-year trend of key lumber and wood products in terms of producer price index.
Q2 saw continued upward pressure in concrete and cement based products with most commodity indices hitting record highs.
Structural Steel Shapes and Rolled Bars
Steel pricing has continued to increase. While traditional steel members, such as wide flange and tube steel have increased in the 70 to 100 percent range, it is joists and decking that have seen the highest surges. Increasing by 300 to 400 percent and with lead times extending to 40-44 weeks, actual schedules are only confirmed by the manufacturer after order placement. The rapidly expanding data center and distribution center markets have created capacity issues for fabricators who are still recovering from reducing inventory and manufacturing capacity.
Asphalt Product Pricing
Paving Asphalt PG 58 is a Performance Graded (PG) asphalt derived from specially selected crude oils via carefully controlled refining processes. Paving Asphalt PG 58 product is recommended for road construction. Asphalt WPU058102 represents the Producer Price Index of Asphalt and Other Petroleum and Coal Products reported by the U.S. Bureau of Labor Statistics.
Asphalt pricing is creeping up primarily due to the increasing costs of petroleum, which stems largely from the speculation that the current administration will inhibit U.S. oil production and OPEC nations will restrict exports.
Gypsum, Drywall and Insulation
Gypsum based products have had volatile pricing for the past 10 months and in June the price of ½“ GWB hit its peak value. As the price of lumber has been receding, it is possible that Gypsum wall board products may also decline in the coming months. Metal stud framing and ceiling suspension systems have continued to increase. All major manufacturers have announced multiple price increases including USG, which announced a 10 percent increase on ceiling suspension systems effective 7/6/2021.
Click the icons to view interactive one-year index or pricing trends.
The commercial construction market has been regaining momentum and is close to pre-pandemic levels. However, sector investments are proceeding with massive spending in present and forecasted data center and distribution projects and as reported in Q1, demands are exceeding the supply chains' abilities. Not unlike Q4 2020 and Q1 2021, increases are primarily due to supply issues related to raw materials, manufacturing and fabrication supply chains re-establishing staff capacities, logistical challenges, international trade policies and foreign country purchasing practices.
This graph shows a one-year trend of key metals by price per pound (lb).
Cement manufacturers typically announce price adjustments prior to April before the start of the season, and prices were increased three to five percent. However, this year an additional mid-year price increase of two to three percent was announced. Ready-mix providers now need to decide how much of that they can push through in their local market. To offset rising transportation costs, fuel surcharges of up to five percent are being commonly reported as well.
Steve Stouthamer
David Formichella
Robert Cantando
Tom Park
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Q1 2021 Report
