Volatile pricing for building materials and fuel could hamper the construction industry in 2006, according to a report from the Associated General Contractors of America (AGC).
Ken Simonson, the association’s chief economist, says that while the U.S. economy is showing signs of strength as a whole, the costs of building materials could prove a prohibitive factor in the construction industry, which has seen two months of record spending, according to statistics from the U.S. Census Bureau.
According to Simonson, “cement makers have already announced price increases for Jan. 1, on top of a 13 percent increase in the past 12 months.”
Simonson also reports that the price index for copper and brass mill shapes was up 21 percent in the past 12 months, while asphalt was up 18 percent, gypsum products up 15 percent and plastic construction products up 10 percent.
“Tight supplies of cement, polyvinyl chloride (PVC) pipe and tires for off-road equipment have been an even bigger problem than high prices for many contractors,” Simonson adds.
The price of diesel fuel has also been problematic, according to the report. “The producer price index for diesel jumped 59 percent from October 2004 to October 2005,” Simonson says. “That directly raises the cost of operating off-road equipment like tower cranes and bulldozers. Contractors also buy diesel fuel to run dump trucks, concrete mixers and other vehicles. And the truck drivers who deliver construction materials are passing through higher diesel costs in the form of fuel surcharges on most deliveries.”
One material that has seen a decrease in price, however, is lumber and plywood.