copper

Moody’s Predicts 3.4 Percent Increase in 2022 Construction Spending

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Moody’s Investors Services is projecting a modest increase in overall construction spending for 2022, based in part on anticipated Congressional passage of the proposed federal infrastructure spending bill.

Stable residential construction activity and a recovery in nonresidential construction spending are the factors contributing to Moody’s projected 3.4 percent increase in construction spending during 2022.

Aggregates companies will benefit substantially from passage of a multi-year federal infrastructure spending bill, says Moody’s analysts, with one-half of U.S. aggregates demand coming from public infrastructure projects and the remainder equally split between residential and nonresidential construction. If a scalable federal infrastructure investment bill passes, analysts project aggregates price and volume increasing an additional 2 percent.

Cement and concrete ready-mix producers also stand to benefit from passage of such a bill, according to Moody’s. In 2021, U.S. cement producers are operating at more than 83 percent capacity utilization, limiting their ability to increase supply, with imported product totaling 15 percent.

Lumber will be affected least by passage of an infrastructure spending bill, Moody’s says, as its largest demand drive is residential construction. Steel and copper will fare slightly better since the Biden Administration’s proposed plan includes green initiatives that are highly reliant on metals.

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Copper Prices Soar to 10-Year High, Metal Heads toward Deficit in 2021

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Copper prices have climbed to their highest level in a decade.

According to global metals analyst StoneX, copper was already trading at a nearly eight-year high in January when prices surged again in mid-February. In mid-February, copper contracts topped $4.25 per pound, approaching an all-time high of $4.58 per pound that the metal reached in 2011.

Investors are predicting that the supply chain will continue to tighten for this metal as the global market gradually recovers in the pandemic aftermath.

“We forecast that copper demand will rise in 2021 by approximately 5 percent year over year,” said Natalie Scott-Gray, a senior metals analyst at StoneX. “Demand is projected to outstrip supply, which we expect to grow by 2.3 percent year over year.”

StoneX analysts aren’t alone in predicting the looming copper supply deficit worldwide. Predictions are than the global copper supply is moving from a surplus in 2020 to a deficit of as much as 200,000 tons this year.

In January, the Copper Monthly Metals Index increased for the fourth month in a row. Analysts point to China’s manufacturing halts and slowdowns during 2020 as a key factor in the supply chokehold. CitiBank analysts say they expect copper prices to continue increasing, both in the US metals market and abroad, as key industries such as construction gain momentum. They project the copper market to shift into a deficit during the second half of 2021 and forecast deficits in the metal during 2022 and 2023, too.

From January through November of last year, the U.S. sold more copper scrap to China than during the same period in 2019. The U.S. exported 102,145 metric tons of copper scrap to China last year, an increase of 20 percent over the same 11 months in 2019. Analysts say China is an important ingredient in the overall recipe for copper demand, as the country is a significant consumer of the metal. Commodity analysts at the Bank of America Merrill Lynch say demand from China was the main driver of copper prices in 2020, but that as consumption from Asia has slowed in recent months, the recovery has broadened.

Pyramid Electrical Contractors, Inc. President Bob Snell knows well the volatility of the metals market. Snell says the firm began seeing increases in the price of not only copper but PVC resins and steel, too, as far back as August 2020.

“In 2021, the price increases have definitely accelerated,” said Snell. “It does affect projects that we had under contract pre-COVID. Some of those projects got put on hold and are now coming back around and we’re needing to adjust the estimate to reflect the metals market volatility. The volatility must also be taken into consideration when estimating our current projects.

We receive weekly conduit and wire pricing updates from our vendors and are continuously adjusting our estimating software to reflect what is occurring. It has been difficult for anyone in the industry to determine what’s going to happen next, even in the near future.”

Murphy Company VP of Estimating Kevin Suiter agrees.

“We’ve received notice from several of our material suppliers that pricing is going up,” Suiter said. “As far as estimating is concerned, we are constantly updating our prices to make sure our estimates include the latest prices. We are also including verbiage in our scope letters to notify our clients that our pricing is only good for a limited time due to the volatility in the market.”

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