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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
Summer 2022
01. Introduction
02. Pricing
03. Forecast map
04. Supply chain
05. Construction/Labor
06. Materials
07. Contact us
Download Report
08. Webinar Series
Webinar Series
Community Foundation Of Middle Tennessee, Nashville, Tennessee
Despite the Fed’s efforts to curtail inflation, construction cost inflation has risen at a rate we haven’t seen for more than 35 years. ENR’s July BCI Index is up 8.74 percent YTD, an annualized pace of 15 percent.
Mitigating Risks
Inflation Undeterred by the Threat of Recession
Investigate the product requirements of your projects early in design and consider accelerated purchasing strategies for materials experiencing shortages, such as: electrical gear, HVAC equipment, roofing, plumbing and structural steel.
Forecast above normal escalation in project proformas. While economic indicators are pointing towards a period of recession, at present it is not prudent to discount construction cost inflation.
Evaluate how interest rates might impact project financing and pipeline in regional markets. Monitor market capacity should local volumes decline.
In previous downturns, the signals were clear: architecture billings decreased, contractor pipelines diminished, supply eclipsed demand and margins tightened. Currently, we’re not seeing any of these signs in a significant way. Reports in June showed a 14 percent decline in construction starts. Despite project value escalation of 25 percent or more since March 2020, many sectors continue to have significant demand and continue to dramatically impact supply chains.
To read the detailed remarks about supply chain challenges, download the full report.
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In addition to booming tech, pharma and electrification construction, May’s American Infrastructure Act update reported that $114 billion had already been allocated to more than 8,500 projects. While some organizations have pulled back on construction investments, the majority are pressing forward. This could take a more sudden turn as recessionary fears grow, but for the balance of 2022, we aren’t predicting any immediate relief in construction price levels or supply chain concerns.
Summer 2022 Construction Pricing Snapshot
13,111
Current Construction Industries Index
+2.5%
Change from previous quarter
Past one-year trend
Construction Index
$4.49
Current fuel price ($/gallon)
-8.9%
Fuel
$105.76
Current oil price ($/barrel)
+5.5%
Oil
$167
Current cement price ($ per CY)
+3.2%
Portland Cement
$1,812
Current standard plate price ($ per net ton)
-7.6%
Steel - Standard Plate
$1,400
Current plywood price ($ per MSF)
-1.2%
Plywood
$573
Current asphalt PG 58 ($ per ton)
+5.8%
Asphalt PG 58
Asphalt
Steel
Cement
Materials Index
Click an index or material to view details
+8.2%
12-month change
+35.3%
+0.7%
+22.3%
+9.3%
+43.9%
+43.2%
5,836
Current material price index
+9.0%
+31.6%
7,899
Building Cost Index
+4.4%
+14.9%
Source: Engineering News-Record
Source: U.S. Energy Information and Administration
Source: Bloomberg
Source: SteelBenchmarker
4,933
+11.2%
+37.6%
Change from previous year
12,465
7,214
+2.9%
+4.9%
+8.4%
+14.5%
$3.18
Current Fuel price ($/gallon)
+0.5%
+45.4%
$75.03
+2.1%
+86.5%
$150.10
-0.3%
+1.5%
$1,707
+15.3%
+178.9%
$1,253.95
-5.1%
+64.5%
$453.61
+2.0%
+15.8%
More Material Insights
Forecasting Local 2022 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 largest construction projects in the Phoenix area are continuing to pay premium prices to maintain workforces. A significant number of semiconductor and semiconductor support projects are underway and will remain ongoing for the next two years. Material and craft labor challenges are impacting pricing and availability of workers as well as rationing of cetain products such as portland cement.
Want to discuss the local market position and forecast? Connect with Tom Feeney, Vice President of Preconstruction.
Local Labor Market Challenges Impact Pricing
Cincinnati, OH
Rumblings of a coming recession have not caused construction spending to slow or construction escalation to level out. Healthcare, as well as K-12 and higher education projects are continuing to push new starts. However, construction cost escalation is causing most owners to reprioritize projects to maximize the value of their investment. Corporate commercial spending is not at pre-pandemic levels, but remains healthy. Industrial spending continues to drive the market and the life science sector is becoming a larger percentage of construction spending. Together, all of these are keeping the local labor market stretched. A significant shortage of trade labor coupled with on-going supply chain issues is having a growing effect on project completion.
Want to discuss the local market position and forecast? Connect with Jeff Smoker, Vice President of Preconstruction in Ohio.
Despite Recession Fears, Construction Backlog Remains Strong
Want to discuss the local market position and forecast? Connect with Chris Hillyer, Senior Vice President of Preconstruction in Texas.
San Antonio, TX
Central Texas Continues Growth Despite Rising Costs
Recent census data shows San Antonio as the fastest growing city in the U.S., so we will continue to see increasing infrastructure demands in the coming years. The San Antonio market has a robust project pipeline in many sectors including healthcare, multi-family, higher ed and manufacturing. As a result, subcontractors are more selective, which may lead to bid coverage issues on projects. Of note, construction will begin soon on the new $17 billion Samsung semi-conductor plant in Taylor (outside of Austin), which will have an impact on the already strained labor market in Central Texas. Finally, speculation continues on how the prolonged price pressures may lead to project delays or cancellations.
Dallas, TX
Want to discuss the local market position and forecast? Connect with Linh Le, Vice President of Preconstruction in Texas.
North Texas Market is as Hot as Our Triple Digit Temperatures
Local Construction Cost Forecast
The DFW metroplex construction market continues to be very busy. To date, more than $12 billion in local construction projects are currently being put in place. Despite supply chain issues and price increases, more projects are on the horizon in all market sectors including expansions to both the Dallas and Fort Worth convention centers, which are budgeted to be well over $2.5 billion. In higher education, UT Arlington and University of North Texas have $200 million worth of work that will be released for contractor bidding by the end of July.
Atlanta, GA
Material prices and lead times continue to increase each month in Georgia as they are around the country. The latest challenge in the market has been mechanical and electrical equipment lead times. Possible solutions are to explore alternate equipment manufacturers as well as resizing equipment to more standard or readily available sizes. Steel prices are starting to increase due to global events and are also an area of concern. Additionally, the residential market is still going strong in Atlanta with no slowdown on the horizon.
Want to discuss the local market position and forecast? Connect with Dane Wooley, Preconstruction Director in Atlanta.
Mechanical and Electrical Equipment Lead Times Extend
Houston, TX
Houston Market is as Active as Ever
The Houston market continues to be extremely busy. Current projects such as Houston Zoo's $70 million expansion, the $200 million Memorial Park Land Bridge project, the $2.5 billion East River mixed-use development, Frito-Lay's $200 million plant expansion and Texas Medical Center's $1.8 billion TMC3 project. New projects like UTMB's $250 million hospital expansion and Harris Health's $700 million tower project are keeping the healthcare sector busy.
Nashville, TN
Want to discuss the local market position and forecast? Connect with Adam Hicks, Vice President of Preconstruction in Nashville.
Construction Still Rocking in Music City USA
Los Angeles, CA
While the competition remains strong in the Los Angeles market, we are seeing some GC's go in with lower fees than on previous pursuits. This could be a sign of trying to recession proof their book of business for a possible upcoming slow down. There are still many opportunities in the healthcare, higher education, and aviation sectors, with multiple jobs at LAX and the LA Community College System. Currently, subcontractors are reluctant to hold any pricing longer than 30 days with anything over that coming at a premium. Additionally, due to some projects pushing, we have heard of personnel layoffs from our trade partners.
Want to discuss the local market position and forecast? Connect with Paul Hackett, Preconstruction Director in Los Angeles.
First Signs of A Possible Slow Down
San Francisco, CA
We are currently experiencing tremendous pressure on budgets that have been in place for any amount of time. While there is still a healthy demand from large institutions, muicipalities, healthcare and transportation sectors, some private developers and deeply leveraged entities are beginning to place projects on pause. Subcontractors are also hesitant to commit to long engagements and while still busy, some firms are experiencing layoffs due to projects pushing. Other subcontractors are seeing projects being re-bid in the hope of the owner receiving lower numbers, though the opposite is happening. There is some continued optimism that commodity prices will begin to decline later this year, but this relief will likely occur later than expected due to geopolitical conflicts and a COVID variance resurgence.
Tremendous Pressure on Budgets
Portland, OR
Demand continues to be strong for construction across multiple markets in Portland. Aviation, healthcare, semiconductor, data center and education sectors are all very hot. Long lead times and elevated pricing are causing concern for customers and requiring thoughtful mitigation strategies in the midst of a very busy construction market.
Want to discuss the local market position and forecast? Connect with Steve Clem, Regional Senior Vice President of Preconstruction in Portland.
Strong Demand Continues in Multiple Markets
Seattle, WA
The market at both the contractor and subcontractor levels continues to be extremely busy with significant field and office labor shortages. Bidders are being extremely selective on which projects they are willing to pursue, focusing many times on "recession proof" projects. Often, subcontractors are requesting longer bid and budgeting durations. Pressure continues on cost and lead times with struggles in holding budgets due to volatile material and commodity pricing. Amazon recently announced pausing several of their projects in Bellevue as they assess the new norm of both remote and office-based working. The impact of this pause has not yet filtered through the market.
Want to discuss the local market position and forecast? Connect with Alan Dunbar, Regional Senior Vice President of Preconstruction in Seattle.
Market Focus is on Work Already Secured
Tampa, FL
The Tampa Metro new housing market (single and multi-family) is one of the hottest in the country, with high demand from out-of-state buyers and remodeling activity adding pressure to an already tight labor market. These new residents drive additional development, complementary service and distribution networks, releasing new office space, higher education and healthcare projects into the market for construction. Additional, larger projects are in the early stages of development. Though the supply chain is stretched, employing early detection, alternate materials and early release packages can help mitigate some of the challenges.
Want to discuss the local market position and forecast? Connect with Jeff Courtney, Preconstruction Manager in Tampa.
Residential Construction Not Slowing, Contributing to a Tight Labor Market
Overall, the residential market, (single and multi-family) continues to be hot with high demand from out-of-state buyers. Residential remodeling activity is adding pressure to an already tight labor market but keeping unemployment rates low. South Florida also continues to be a destination for tech companies and these new residents will drive additional development. Other industries around technology have increased interest in office space, higher education and healthcare institutions and are releasing small, medium and large projects. Multiple, significant projects are in the early stages of development as well. As the supply chain continues to be strained, mitigation strategies could include: early detection, alternate materials and early release packages.
Want to discuss the local market position and forecast? Connect with Jeff Courtney, Preconstruction Manager in South Florida.
Residential Demand Continues to Drive Labor Cost
North Carolina/Virginia
The NC/VA market continues to see a strong pipeline of projects, driven in part by major manufacturing facilities. While some projects are facing slight delays to overcome budget challenges, very few are being shelved entirely due to the unprecedented material cost inflation. We also anticipate an increase in regional bidding opportunities with backlogged projects being reactivated. As a result, the trade partner community has stayed optimistic about upcoming work and selective in their bidding, particularly for larger projects where they may be asked to take on the risk of future cost escalation. With land availability decreasing and costs rising, construction continues to expand into outlying counties. In the short term, material cost increases will continue to exert pressure on construction costs. Continued national and regional price hikes and availability shortages are being reported in glass, aluminum and gypsum products. What will be critical is whether this further price pressure and increasing interest rates, will eventually result in the cancellation of more projects that are no longer economically viable.
Want to discuss the local market position and forecast? Connect with Will Senner, Vice President of Preconstruction in North Carolina and Virginia.
Strong Regional Backlog Continuing to Drive Growth
Washington, D.C.
Construction continues in the DMV area despite continuous price increases and supply chain challenges. There is substantial work anticipated in the coming years, including major renovations for Union Station, new Smithsonian museums and phase two of the Wharf development. Higher education facilities such as George Mason University and Howard University continue to invest in capital projects. Some residential developers are pausing projects due to increased escalation with trades such as drywall, mechanical equipment, glass and glazing. Because lead times and the strained supply chain continue to be a challenge, large builders are turning to creative solutions such as early and out of sequence procurement, material storage facilities, prefabrication, panelization and phased GMP's. We don’t anticipate relief until Q2/Q3 2023.
Want to discuss the local market position and forecast? Connect with Apryl Webb, Vice President of Preconstruction, Washington, D.C.
With $10.3 Billion in Development, Investment in the City Hasn’t Slowed
Philadelphia, PA
The Philadelphia Metro market continues to see a large push in the Life Sciences market sector. Large pharmaceutical companies along with smaller start-ups are coming into the region to take advantage of the talent at our local universities. We are also seeing higher education projects return to typical levels. We are still seeing major material escalation with availability not getting better.
Want to discuss the local market position and forecast? Connect with James Lane, Vice President of Preconstruction in Philadelphia.
Life Sciences Market is Hot in Philadelphia!
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.
New York Region Still at Record High Increases
Supply chain issues and price escalation continue to impact equipment delivery and construction schedules, challenging the industry to keep budgets and schedules in line for owners. Despite these challenges, over the next six months we expect major projects to come out in the transportation and infrastructure sectors. Healthcare will remain strong throughout the year and beyond, and life sciences continues to outpace the other sectors in new work again for this quarter. Cultural and higer education have also made inroads this summer with new opportunities coming on line.
Want to discuss the local market position and forecast? Connect with Nick Culver, Vice President of Preconstruction, New Jersey.
Jersey Shore Summer Travelers Frustrated by Ongoing Work on Major Highways
Next 6 months
6 months - 1 year
1 - 2 years
The New Jersey Department of Transportation has forecasted to spend nearly $1 billion by year's end and the New Jersey Turnpike Authority, which runs the Garden State Parkway, has multi-million dollar projects underway. Although policies are in place to limit roadwork on coastline routes during summer weekends and holidays, repairs and improvements remain in full swing during the workweek. In addition to roadway improvements, NJ Utilities is projected to spend nearly $4 billion this year. As a result of the upgrades to local highways and utilities, many other market sectors are benefiting from greater access and are putting more work in place before 2023. Some key sectors include: independent colleges and universities ($1 billion), banks ($1 billion), industrial/offices ($1.4 billion) and hospitals ($1.5 billion).
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
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction.
Increased Competition Replaced with Escalation
Market is experiencing significant/abnormal construction price inflation (+5% per annum)
Boston/New England
Market growth continues in the Boston region. Life sciences, higher education, corporate commercial, residential and government work are driving this growth, with significant expansion in the commercial lab and pharmaceutical sectors. Many subcontractors are at or near capacity with good backlogs for 2022 and some into 2023. Though material cost escalation slowed for the first three months of 2022, we have seen a return to above-average escalation with availability still a major concern. Delivery times for items that are traditionally long lead are still showing extended lead times, some by as much as 100 percent. Transportation, logistics and labor challenges are also disrupting delivery certainty. We anticipate this pressure will continue through the end of 2022. Collaborating with local subcontractors and our national Strategic Supply Chain team will help ensure materials remain available for our projects by seeking alternative materials or issuing early design packages to get materials ordered earlier.
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction, Boston.
Construction Market Stays Hot Despite Continued Escalation
Click on the locations below to see construction forecast details for a specific city or region.
Miami/ Ft. Lauderdale
N. Carolina/ Virginia
Orlando, FL
Want to discuss the local market position and forecast? Connect with Brian Coakley, Director of Preconstruction in Orlando.
Throughout this region, labor shortages and retention are stabilizing. To meet the staffing demand for major projects, quality, skilled trades personnel are available and are not changing companies as often. The non-residential, masonry labor shortage in the region continues to be a huge challenge resulting in many commercial developers and designers substituting architectural precast for scopes that were traditionally concrete-masonry. Concrete prices in the Orlando market have seen another recent increase. However, overall steel costs appear to be stabilizing and the lead time for items such as bar joists are steadily decreasing. This is possibly due to the construction of eight different Amazon locations slowing down – and average of 400,000 gbsf built throughout the region within the last two years.
Want to discuss the local market position and forecast? Connect with Mark Lewis, Preconstruction Manager in Tampa.
Construction Markets Steady Despite Continued Material Escalation
Nashville's construction boom continues across multiple sectors amplifying the ongoing challenges of labor shortages, material logistics and lead times for major equipment. Our local office continues to experience a rise in construction costs as well as limited subcontractor availability for work coming in the next 18 to 24 months. Additional caution is recommended to ensure selected partners are not over extended. Local suppliers of raw construction materials are also experiencing allocation issues with materials like concrete. Even with the recent rise in federal interest rate, local apartment demand remains high and the resulting increase in rental rates is still outpacing the rise in construction costs. Combined with the continued influx of major corporations and the accompanying population growth, the urban residential market remains strong. Lastly, public investment is strong with the State of TN, Metropolitain Davidson County and the Nashville Airport Authority.
With backlog growing in early 2022, the increased competition for work during the first three months has been replaced with a return to above-average escalation. The market is now busy and subcontractors have steady backlogs through the end of 2022. Delivery times for items that are traditionally long lead are still showing extended lead times, some by as much as 100 percent. Transportation, logistics and labor challenges are also disrupting the certainty of delivery. We anticipate this pressure will continue until late 2022 at least. Collaborating with local subcontractors and our national Strategic Supply Chain team will help ensure materials remain available for our projects by seeking opportunities for alternative materials or issuing early design packages to get materials ordered earlier.
Want to discuss the local market position and forecast? Connect with Alan Dunbar, Regional Senior Vice President of Preconstruction.
Supply Chain Trends and Insights
Status Key
Stable/Consistent
Trending Down
Fluctuating
Trending Up
Roofing supply chains remain constrained due to the busy summer season. All categories of roofing material are experiencing shortages including membranes, insulation board, cover board, adhesives, screws and plates. Constant communication with roofing subcontractors is critical to ensure that material delivery dates stay on target. Polyiso insulation continues to be the most difficult material to acquire with a lead time of of more than 50 weeks. Some decreasing lead times are being seen in certain markets. It is expected that after the busy summer roofing season, lead times will stabilize and start to recede slightly.
Lead Time
Price
Roofing Products
Pricing escalation had paused at the end of 2021 and into the start of 2022. However, steel pricing started to escalate once again as war broke out in Ukraine, in part, because of supply disruptions of pig iron from that region. Now pricing is stabilizing again, albeit at an elevated level. Lead times for the toughest steel items to procure, namely bar joists and decking, are also seeing stabilization and are beginning to recede.
Structural Steel
Click for further analysis
Some interior materials prices continue to escalate, while others have stabilized. Armstrong has announced a 17 percent increase on ceiling tiles (effective July 1) and a 15 percent increase on suspension systems (effective May 9). However, drywall and metal stud pricing has been quiet during the second quarter and there haven’t been any increases announced.
Architectural Interiors
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Both dimensional lumber and panels pricing have declined quickly. Rising interest rates are starting to cool the housing market as can be seen in the NAHB housing starts report. Housing starts declined from 1.8 million in April to 1.5 million in May. Lumber buyers are letting inventory levels run low in anticipation of lower pricing going forward. It is anticipated that lumber pricing will continue to decline.
Wood-based Building Materials
Although material inputs to lab casework (steel and resins) have stabilized from a pricing point of view, manufacturers are being hit by unforeseen increases. An example of this is the sudden, steep price increase announced by most glass manufacturers in recent weeks (an increase of 40 percent). This significant jump will affect the cost of fume hoods which utilize glass enclosures. Lead times are stable at 18 weeks.
Lab Casework and Fume Hoods
Demand for appliances remains high. Although there are signs of a slowing housing market, order backlogs are significant. It will take some time for backlogs to diminish and for lead times to reduce. Significant relief is not expected until Q4 2022 with prices continuing to increase. GE Appliance announced a 9 percent increase effective July 18.
Appliances
Continued commodity price escalation and strong demand is expected to drive price increases across all major elevator manufacturers in the range of 8 to 20 percent for the year ending 2022. Lead times for elevators vary considerably depending on the category; low rise elevators range from 14 to 27 weeks, mid-rise elevators range from 20-27 weeks, high-rise elevators range from 40-48 weeks and freight/service/escalators range from 30-42 weeks.
Elevators, Escalators, Moving Walks
With exception to a few items, distributors have been doing a very good job keeping sufficient stock of pipe, valve and fitting material on hand. In the last 3 months, however, there have been over 240 announced manufacturer price increases averaging between 10-15 percent. One exception to available inventory continues to be reinforced concrete (RCP). Earlier this month, Oldcastle issued a letter detailing a supply constraint for welded wire mesh across North America due to a shortage of green rod, labor and transportation issues. Looking out 6-12 months, we are starting to see some signs that pricing will flatten out and some items may come down.
Plumbing and Drainage
Lead times and price continue to rise across nearly all manufacturers and delivery dates are becoming more unreliable in general. The primary issue is delays in the delivery of components to equipment manufacturers. There are wide ranging supply chain issues but the most common and longest delay is related to ECMs due to semiconductor chip shortages. Lead times of ECMs are running 70 or more weeks at this time. Traditional VFDs are being substituted for ECMs which is driving up VFD lead times. Prices YTD are up 25-30 percent.
HVAC Equipment
While a global shortage of semiconductors is affecting several industries, the impact on building controls has been minimal due to mitigation efforts by controller manufacturers. Prices and lead time for materials are expected to increase moderately, however installation labor will continue to dominate price and lead time in this category.
Building Control Systems
Lead times for switchgear, switchboards, panelboards and transformers continue to rise as demand hits historic levels driven by semiconductor manufacturing, automotive -EV, crypto currency mining, data center and significant strength in general commercial construction. UL1558 Switchgear, transformers, and unit substation lead times are now at 80 or more weeks as manufacturers book orders through 2025. Driven in large part by data center demand and lack of investment into new factory capacity, manufacturers are not expecting lead times to improve for at least the next 24 to 36 months and are likely to degrade even further.
Electrical Gear
Lead times and pricing for several commodity electrical items are down as a result of lower copper and steel commodity prices in recent weeks. Some manufacturers have invested in additional capacity to reduce lead times. Lead time for highly specific items, such as 5kV -15kV medium voltage cable, are getting better as well, now running 14 to 20 weeks if they’re not in stock (this is down from 20 to 28 weeks in the previous quarter). These lead times are still higher than the standard of six to eight weeks.
Electrical Commodity Materials
Driven by surging demand in several commercial sectors, including data centers and 5G telecommunications, lead times for generators have increased significantly and are now in the range of 48 to 67 weeks. Custom enclosures may add an additional four to six weeks of lead time. Manufacturers are booking orders through 2025 for 1MW gensets and larger for data centers which are looking to accelerate expansion in the next two to three years. Overall, pricing for gensets will be up by nearly 20 percent for 2022.
Generators
The market environment remains challenging. Labor shortages continue to impact operations and create delays specifically in the ports and rail. U.S. freight railroads continue to face challenges as labor and chassis shortages are contributing to schedule disruptions. Although fuel surcharges have risen to 50 percent for a less than truckload shipment, there is an indication that trucking capacity will continue to increase, which should provide some relief for transportation prices. Transportation utilization trended downward as well over the past quarter. Even though fuel prices have remained elevated, pricing trends may continue to decrease in the short term.
Transportation
Wood Products
Lumber pricing presented in the Supply Chain section of this report, reflects current pricing as it exits lumber mills in North America. This pricing has fallen dramatically. However, there is still higher priced inventory in the supply chain all the way through to wholesale and retail outlets. Plywood and lumber price declines at points of sale will continue to fall as inventory levels are burned off. Earlier in this report, we presented plywood price data that had not fallen off as dramatically, because it is measured at points of sale.
Steel pricing appears to be leveling off. In addition, there are some discussions starting around eliminating the Section 232 tariffs on imported steel. The Coalition of American Metal Manufacturers and Users (CAMMU) is urging the Biden Administration to eliminate the tariffs, stating that the U.S. has become an island of high-cost steel.
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.
Crude oil prices have retreated from the 14-year high in March and have remained close to $100 a barrel due to weaker demand, economic slowdown fears and concern of a new wave of lockdowns in China. Transportation utilization decreased and capacity increased. Consumer demand continued to shift as inflationary pressures cut into discretionary spending. Ocean Freight: While congestion at the ports remains an issue, there is some stabilization. Freightos reports that shipping container pricing is down 50 percent in Q2 for routes from Asia to the West Coast. Rates are just below $7,500 for a shipping container and prices are currently 14 percent lower year over year. In contrast, routes from Europe to the East Coast are surging and are up 42 percent year over year. Even as pricing continues to drop, long lead times remain an issue. Sea-Intelligence reports that around two thirds of global shipment schedules are late.
To learn more about supply chain trends, reach out to Tom Park or Rob Cantando.
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Doors and Hardware
Elevators, escalators, moving walks
Building Control systems
Electrical commodity Materials
Lead Time and Price Snapshot
Click a category to view details
Trending Up Significantly
Logistics
Roofing
Roofing materials are typically procured as a complete package to be sure that all components are compatible and to allow roofing providers to warrant the total system. We have had some success with substituting certain materials to improve delivery dates, however, this takes a coordinated effort. It is important to work hand-in-hand with the roofing material supplier, the subcontractor, the design team and the owner. Some substitutions require design modifications. For example, replacing polyISO with polystyrene will typically result in the need for a thicker insulating panel to achieve the same R-Value.
The LMI for June was 65.0, which indicates that growth is slowing. This number is down significantly from the 76.2 reading in March and is the third consecutive reading that has decreased. Key drivers of the LMI index decrease are warehousing prices, transportation prices and transportation utilization.
Doors and hardware continue to experience extended lead times. More standard hardware lead times are in the four to five week range but as the hardware becomes more specialized, lead times extend significantly. For example, custom finishes can add up to six weeks to standard lead times. Standard doors and frames are experiencing lead times in the 9-12 week range. The most challenging materials continue to be on the electronic access side. Card reader lead times are still unpredictable so a six-month lead time budget is recommended.
With copper down from $3.76 to 3.42 per lb. (9 percent over last 30 days), copper wire prices are following, down five to 10 percent. Steel conduit is also down as much as 10 percent over the last month. Panel lug lead times for large gauge (250mcm to 1000mcm) are three to four weeks, if not in stock and prices are flat. Data center and semiconductor demand as well as automotive EV are driving the market. Resin prices are staying flat, keeping PVC conduit prices stable for now. Lead times are running about four to six weeks for large quantities with smaller quantities typically in stock. With steel dipping down about 10 percent, cost and lead time for Unistrut has improved.
The Logistics Managers Index (LMI) tracks key metrics, such as transportation, warehousing and inventory data collected monthly from industry professionals. A value less than 50 indicates a contracting market and above 50 a growing market. The LMI for June was 65.0, which indicates that growth is slowing. This number is down significantly from the 76.2 reading in March and is the third consecutive reading that has decreased. Key drivers of the LMI index decrease are warehousing prices, transportation prices and transportation utilization.
Current Status:
6-12 Month Forecast:
Special considerations:
Rockwool has announced a 15 percent increase on all mineral wool insulation products (effective May 16). Other insulation producers have been quiet so far this year. Although some costs are stabilizing, subcontractor bids are expected to remain elevated as material pricing remains at very high levels. In the longer term, a cooling housing market may offer some relief.
The key takeaway for August’s LMI of 73.8 is that transportation prices and utilization continue to grow. Peak transportation season is in full swing (with the holidays approaching), which adds pressure to a strained supply chain making relief early next year unlikely.
Ceilings, drywall, metal studs, flooring, paint, etc.
Plumbing
Lighting
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.
The Logistics Managers Index (LMI) tracks key metrics, such as transportation, warehousing and inventory data collected monthly from industry professionals. A value less than 50 indicates a contracting market and above 50 a growing market. The average through January 2020 was 63.15, with the LMI trending down. The average from February 2020 to present is 66.31, indicating strong expansion. June-August 2021 were the highest three months since inception, with an average of 74.4, largely driven by transportation growth. The key takeaway for August’s LMI of 73.8 is that transportation prices and utilization continue to grow. Peak transportation season is in full swing (with the holidays approaching), which adds pressure to a strained supply chain making relief early next year unlikely.
Metal studs continue to escalate with Super Stud announcing a 10 percent increase as of October 1, 2021. This brings total inflation on metal studs to 100–120 percent since Fall 2020. After a quiet period for drywall pricing, new increases have been announced by many manufacturers (including USG, CTD and Nat. Gyp.) of 20 percent, effective in October. Poly ISO and polystyrene insulation also continue to escalate. Hunter (polyISO producer) has announced a 10 percent increase, effective Jan. 1, 2022. In addition, Dupont has announced a 10 percent increase on their polystyrene products, effective Oct. 1, 2021. Lead times for Rockwool’s mineral wool product is now exceeding 200 days, leading them to announce that they will continue to acknowledge new orders but will not provide delivery 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.
What is LMI?
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.
(Includes fixtures)
RCP lead times are a minimum of three months, and specialty items like fire hydrants are running six to 12 months. Above-grade plumbing, valve and fitting inventory and lead times are stable. Distributors are striving to increase inventory to protect against stock outs in the face of continued strong demand. The war in Ukraine has driven up the price of raw materials and energy, which has resulted in a flood of price increases on all items since the beginning of March. More than 200 manufacturers have announced price increases since the beginning of 2022 averaging 7–10 percent.
High Purity Process PVF
Lead times have not improved over the past three months. Demand is expected to remain strong over the next 24 months due to major investments in semi-conductor, life science and pharmaceutical manufacturing within the U.S.
High Purity Process Pipe, Valves and Fittings (PVF)
Lead times described are after fully approved submittals and factory accepted release
Many companies have announced insulation price increases: Johns Manville (25 percent on mineral wool products effective May 1), Rockwool (going from 12 percent on April 1 to 15 percent on May 16 for mineral wool product), Hunter (12 percent on polyiso insulation effective February 1), DuPont (8 percent on extruded polystyrene [XPS] effective Jan 4). The most significant lead time continues to be with polyiso, which remains in the 48-52 week range.
The biggest factors impacting projects are long lead-time items, which are up four to six times historical levels, and unpredictable deliveries caused by supply chain disruptions. The categories most affected by long lead items are electrical gear, HVAC equipment, roofing, plumbing and structural steel. As a result, commercial construction schedules and sequences are impacted, which results in a rush of early procurement of material and equipment causing even longer delays and price escalation.
There are some positive signs. In the commodities markets, higher interest rates and prices are expected to cool demand in the coming months. And though material and equipment prices are challenging for construction clients, demand and funding from high tech, healthcare, education and public sectors are expected to sustain a steady flow of projects.
Residential housing will most likely see a slowdown as interest rates increase. Prices for copper, steel and lumber are already dropping and other materials, like drywall and electrical commodities, are seeing a slowdown in price escalations. It is uncertain whether this pricing slowdown will continue.
Order backlogs and new orders are at historic levels. Manufacturers struggle to keep up with demand due to shortages of input materials and labor. There is very little “slack” in the supply chain and any disruptions, even minor, are impacting manufacturers’ ability to deliver.
U.S. Construction Employment
June 2022 construction employment has pushed its peak up to 7.670 million workers with unemployment at nearly an all-time low of 3.7 percent, compared to 6 percent back in March 2022. According to an analysis by the Associated General Contractors of America, “the number of jobseekers with construction experience plunged to a record low… the industry would likely have added even more jobs in June had it not been for the shortage of available workers.” Average hourly wages ended at $34.68 in June 2022 compared to $32.85 in June 2021.
Architecture Billings Index
Hover over the chart to see exact figures
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.
The June Architecture Billings Index (ABI) score of 53.2 indicates billings continued to grow at a modest pace after a burst of stronger growth in the spring. However, “the future is looking increasingly cloudy” as the inquiries into new projects had the slowest rate of growth since economic recovery began in early 2021. The value of new signed designed contracts also fell to the slowest pace of growth since January 2021 and backlog declined slightly. Business conditions across the country remain mixed, and firms with institutional specialization reported the strongest growth for the first time since before the pandemic.
-50 =50 50+
Decrease in volume
Increase in volume
Neutral
Scoring:
Skilled Labor Index and Common Labor Index
The ENR Skilled Labor and Common Labor indices measure growth in union wages for select trades. The period preceding the pandemic saw steady increases in both the Skilled and Common Labor indices. More recently, the Skilled Labor Index has increased at a 10 percent pace in the past 12 months. This aligns with our previous comments regarding wages escalating to keep pace with inflation. We expect this pressure to continue as the first phase of the American Infrastructure Legislation projects move forward and increase the deficit of 650,000 craft jobs (as forecasted by ABC).
Construction Spending and Dodge Momentum Index
Nonresidential building starts dropped 14 percent in June, reflecting broad-based decline across most market sectors. Year-to-date, nonresidential building construction starts are still 13 percent higher than last year. “Construction markets are getting jittery as the odds of recession increase,” said Richard Branch, chief economist for Dodge Construction Network. “While projects are still moving through the planning process, the velocity has downshifted reflecting uncertainties over how rising interest rates will impact the economy, construction material prices, and ultimately, construction starts. Over the short-term, construction-facing indicators are likely to be more volatile than normal, particularly in the commercial sector.”
Construction, Architecture and Labor Indices
Spending
Employment
Labor
Source: U.S. Bureau of Labor Statistics
Source: U.S. Census Bureau and Dodge Data & Analytics
Architecture
Source: AIA
Click on the chart to see exact figures
Construction, Architecture and Labor Indices
Read the full ABI Report for June 2022 here.
Construction Materials and Commodities Pricing
Despite growing concerns about labor capacity and the recession, the cost of construction materials and the demand that is disrupting the supply chain and delivery of products to jobsites remain the primary topics of discussion in our industry. Present and anticipated demand indicate that while some sectors could be challenged if these inflationary pressures continue, other sectors seemed poised to push through a recession helping to keep material pricing high and supply chain challenges present for the foreseeable future.
Piping
Lumber and Wood
Metals
Oil, Gas and Fuel
Drywall, Gypsum and Insulation
Concrete and Cement
Pipe Producer Price Index
Polyvinyl Chloride (PVC) Pipe Average prices rose 5% since last quarter. Copper Pipe Average pipe prices declined as copper commodity prices decreased. Carbon Steel Pipe Carbon steel prices rose 11% since last quarter.
After hitting a record high U.S. avg. of $5.02/gallon for regular unleaded gasoline in mid-June, average prices have receded modestly to around $4.49/gallon. Experts report that fuel pricing is largely speculative and reactive to economic indicators. If continued inflationary fears persist and traders remain concerned about a period of recession, the price of oil will likely continue to slide and fuel prices along with it. If demand powers through the recession and the sanctions remain in effect against Russia, fuel prices could climb even higher.
Aluminum Aluminum prices continued to fall from the record high prices seen in March of 2022 as supply increased due to energy curbs being lifted in China and reduced demand.
Zinc Zinc prices have fallen to a nine-month low, driven down by recession fears. Inventory levels remain low as producers in Europe reduced production in response to soaring energy costs, leaving future pricing uncertain.
Nickel Nickel prices have continued to retreat since an unexpected short squeeze earlier this year. Prices are expected to remain relatively stable over the next few months as global supplies increase and fears of an economic slowdown impacts demand.
Copper Copper prices have declined steadily since hitting an all-time high in March and are now at a 19-month low. Copper pricing typically correlates to the sentiment on the economy and recession fears are contributing to the downward trend. Copper prices are expected to remain relatively stable, and even see additional softening over the next few months.
Lumber and Wood Products
Lumber pricing peaked in March 2022 and has been moving downward ever since. Dimensional lumber is now down 56 percent from the previous peak. Lumber mills are cutting back production in the hopes of stabilizing prices. Lumber pricing is mainly driven by new housing starts which took a big step downward in May. Housing starts peaked at 1.8 million (annual rate) in April, then dropped to 1.5 million in May.
Structural Steel Shapes and Rolled Bars
In general, pricing for steel products is declining. For example, Hot Rolled Coil (HRC) has already declined 36 percent so far in 2022. In addition, steel rebar has declined 19 percent since it peaked in May 2022. It is anticipated that the current stabilized price of structural steel will begin to decline in the coming months.
Asphalt Product Pricing
Asphalt pricing, which typically lags the petroleum industry by several months, is rising as it is also affected by demand. The American Infrastructure Legislation work is likely to keep upward pressure on asphalt pricing for several years given the nature of that work.
Gypsum, Drywall and Insulation
Drywall and metal stud price increase announcements have paused during the second quarter. However, accoustical ceiling tile and insulation continue to escalate. Armstrong has announced a 17 percent increase on ceiling tiles effective July 1 and a 15 percent increase on suspension systems effective May 9. Rockwool has also announced a 15 percent increase effective May 16 on all mineral wool products. These products continue to experience very high demand with many being supplied on allocation. Further price escalation is anticipated through the balance of 2022.
Click the icons to view interactive one-year index or pricing trends.
Source: U.S. Energy Information Administration
Source: U.S. Bureau of Labor Statistics PPI
Source: Engineering News-Record and U.S. Bureau of Labor Statistics PPI
Source: Kitco
This chart shows a one-year trend of pipe producer price index. Polyvinyl Chloride (PVC) Pipe Average prices continue to rise, up eight percent since Hurricane Ida struck the Gulf Coast in August and up 48 percent year-to-date. Copper Pipe While raw copper costs have stabilized, the price of copper pipe continues to increase, up more than 32 percent since January 2021. Carbon Steel Pipe Average cost of carbon pipe is also up more than 60 percent year-to-date due to increased costs of raw material and transportation.
This graph shows a one-year trend of key metals by price per pound (lb).
This graph shows a one-year trend of key lumber and wood products in terms of producer price index.
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.
This chart shows a one-year trend of pipe producer price index.
Concrete supplies remain tight and concrete products are on allocation in some markets with demand remaining extremely strong. High demand during winter months did not allow cement manufacturers to build up inventories in anticipation of seasonally high demand during summer months. In addition, cement plant maintenance breaks in the spring further reduced supply. Concrete demand is not wavering, and supply levels of key production materials such as clinker (used to produce cement) have remained low. It is unlikely that this shortage will ease in the near term, and it is expected that it will take months before supply catches up to demand.
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