Steel climbs further, lumber tumbles in July
The gulf between contractors’ costs and pricing continued to widen again in June. The producer price index (PPI) for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of buildings—increased 0.4% from May and 3.4% year-over-year (y/y) since June 2020, while the PPI for material and service inputs to construction industries jumped 3.8% and 26.3%, respectively, the Bureau of Labor Statistics (BLS) reported on Tuesday. There were double- and even triple-digit percentage y/y increases for numerous inputs: diesel fuel, 127% y/y; lumber and plywood, 101%; steel mill products, 88%; copper and brass mill shapes, 61%; aluminum mill shapes, 33%; plastic construction products, 22%; gypsum products, 18%; truck transportation of freight, 15%; asphalt felt and coatings, 11%; and insulation materials,10%.
The prices used to calculate PPIs were generally in effect around June 11. Since then, there have been numerous price increases for steel products. A reader forwarded a June 29 letter from a supplier that it was increasing rebar prices 4.67% on July 1 and 8-9% “tentatively” on August 1. Atlas Tube wrote to customers on Tuesday that it “is raising the price on all new orders for mechanical, HSS [hollow structural shapes,] and piling products” $125 per ton, effective immediately. Readers are invited to send cost and supply-chain information to email@example.com.
Lumber futures have continued the plunge that began in early May, closing on Thursday near year-ago levels but up 29% from the pre-pandemic peak in February 2020. While prices may not have fallen as much at the dealer or retail level, “lower prices are beginning to beckon buyers, especially developers of big projects, like apartment buildings, which shelved construction plans when prices reached unprecedented levels,” the Wall Street Journal reported on Thursday. But “the spotlight on lumber continues to crowd out the story of meteoric price increases of another wood product integral to the integrity of a building’s structure—oriented strand board (OSB),” which is used in walls, flooring, and roofing, the National Association of Home Builders wrote on Wednesday. “The price of OSB has increased 510% since January 2020, exceeding the peak price increase in lumber by nearly 180 percentage points. Although plywood panel prices have substantially increased over the past 18 months as well, the increases have been less than half those seen in the OSB market. In addition to elevated prices, acute shortages have plagued the residential construction industry–particularly after the severe winter weather experienced in the south in February.” In addition, flooring manufacturer Shaw Industries notified customers on July 2 that it “will implement a temporary freight surcharge on all hard surface products,” effective August 16.
Seasonally adjusted construction employment in June trailed the February 2020 level in 39 states, exceeded it in 11 states, and was unchanged in the District of Columbia, according to AGC’s analysis of Bureau of Labor Statistics (BLS) data posted today. (February 2020 was the month in which employment peaked nationally before plunging during widespread shutdowns in March and April 2020.) New York lost the most construction jobs since February 2020 (-54,300 jobs or -13%), followed by Texas (-54,100, -6.9%), California (-36,500, -4.0%), and Louisiana (-20,700, -15%). Wyoming recorded the largest percentage loss (-15%, -3,500 jobs), followed by Louisiana and New York. Utah added the most jobs (7,000, 6.1%), followed by Idaho 4,400, 8.0%), South Dakota (1,400, 5.9%), and Rhode Island (1,200 5.9%). Idaho added the highest percentage, followed by Utah, Rhode Island and South Dakota. For the month, construction employment declined in 25 states, increased in 24 states and D.C, and held steady in Maine. Georgia added the most construction jobs from May to June (5,700, 2.9%), followed by Kentucky (2,700, 3.4%) and Florida (2,500, 0.4%). Kentucky had the largest monthly percentage increase, followed by Alaska (3.0%, 500) and Georgia. New York lost the most construction jobs for the month (-6,900, -1.9%), followed by Pennsylvania (-4,100, -1.6%), and Texas (-3,300, -0.5%). Vermont had the largest percentage loss (-3.5%, -500 jobs), followed by New York, Alabama (-1.9%, -1,700) and North Dakota (-1.9%, -500). (BLS reports combined totals for mining, logging, and construction in D.C., Delaware and Hawaii. Because there are few, if any, mining and logging jobs in these locations, AGC treats the levels and changes as solely construction employment.)
Construction starts, not seasonally adjusted, increased 2.4% y/y in June from June 2020, data firm ConstructConnect reported on Tuesday. Year-to-date starts for January-June 2021 rose 2.1% from the same months in 2020. Year-to-date nonresidential starts slumped 11%: nonresidential building starts plunged 20.5% (commercial, -21%; institutional, -11%; and industrial [manufacturing], -10%), while engineering (civil) starts fell 4.8% (including road/highway, -1.8%, and water/sewage, +9.8%). Residential starts soared 23% year-to-date (single-family, 32%, and apartments, 0.1%).
“Residential construction softened in several districts in response to rising costs, while commercial construction was mixed but up slightly on balance,” the Federal Reserve reported on Wednesday in the latest “Beige Book,” a summary of informal surveys of businesses in the 12 Fed districts from mid-May through June. (Districts are referenced by the names of their headquarters cities.) AGC posted excerpts relevant to construction from each district’s report, including the following. New York: “Wage growth has picked up somewhat, most notably for jobs in” construction, among other sectors. San Francisco: “Worker shortages were also noted in construction” and three other sectors. Dallas: “Industrial construction and leasing remained exceptionally strong.” Reminder: Contractor readers are invited to take the 2021 AGC/Autodesk Workforce Survey.