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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
Q3 2021
03. Forecast map
05. Construction/Labor
02. Pricing
06. Materials
07. Contact us
01. Introduction
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04. Supply chain
When Hurricane Ida struck Louisiana in August, it made an already challenging supply chain situation even worse and exacerbated ongoing disruptions from Winter Storm Uri earlier this year. The Gulf Coast is a hub for petrochemical manufacturing, producing many products essential in the manufacture of critical building materials and Ida dashed any hopes for a return to supply chain normalcy with respect to those products in 2021.
Top Considerations for the Upcoming Quarter
An Imperfect Storm
Evaluate the lead times allowed for constrained products in all project schedules. Make adjustments to purchasing strategies.
Consider alternatives to specified products if lead time challenges are unavoidable.
Consult with supply chain resources in the planning of projects. Stay connected!
Even more complex is the logistical crisis. Dozens of container ships sit off the coast of Los Angeles and Long Beach with up to 400,000 containers waiting to be unloaded. Most attribute the bottleneck to increased demand since the pandemic. Product destinations have also increased, putting pressure on already scarce transportation resources. As a result, logistics prices have risen, and this month the median cost of shipping a standard container from China to the West Coast hit a record $20,586, nearly double from July, which was already double from January, according to the Freightos index.
To read the detailed remarks about supply chain challenges, download the full report.
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Note that this report contains a snapshot of the market as we know it today. Due to the current volatility in pricing and supply it is necessary to monitor changes and share information amongst teams daily.
Q3 Construction Pricing Snapshot
12,465
Current Construction Industries Index
+2.9%
Change from previous quarter
Past one-year trend
Construction Index
$3.18
Current Fuel price ($/gallon)
+0.5%
Fuel
$75.03
Current oil price ($/barrel)
+2.1%
Oil
$150.10
Current cement price ($ per CY)
-0.3%
Portland Cement
$1,707
Current standard plate price ($ per net ton)
+15.3%
Steel - Standard Plate
$1,253.95
Current plywood price ($ per MSF)
-5.1%
Plywood
$453.61
Current asphalt PG 58 ($ per ton)
+2.0%
Asphalt PG 58
Asphalt
Steel
Cement
Materials Index
Click an index or material to view details
+8.4%
Change from previous year
+15.8%
+64.5%
+178.9%
+1.5%
+86.5%
+45.4%
4,933
Current material price index
+11.2%
+37.6%
4,435
+13.2%
+25.3%
12,112
+3.1%
+5.9%
$3.06
+2.6%
+47.2%
$73.47
+24.2%
+87.1%
$153.08
+0.1%
+3.4%
$1,481
+30.8%
+146.4%
$1,390.62
+18.5%
+123%
$423.27
0.0%
+5.2%
7,214
Building Cost Index
+4.9%
+14.5%
Source: Engineering News-Record
Source: U.S. Energy Information and Administration
Source: Bloomberg
Source: SteelBenchmarker
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
Construction starts continue at a record pace in Arizona, with the two largest microelectronics companies in the world anchoring the boom. Labor and materials continue to increase on a weekly basis, with travel, per diem and bonus pay becoming a normal course of business to retain labor for projects. Early onboarding of key subcontractors in the life cycle of a project and early procurement of materials present the best path forward for new construction starts to ensure these strong escalation headwinds are mitigated.
Want to discuss the local market position and forecast? Connect with Andrew Rabasca, Regional Director of Preconstruction.
High-Tech Sector Building Continues to Pressure Construction Resources
Cincinnati, OH
The demand for construction has remained strong in the Cincinnati area. The primary drivers are multi-family housing, private commercial development and education. Healthcare has started to see some growth, after the initial contraction in 2020 due to the pandemic. The local supply chain continues to see disruption due to ongoing pandemic issues, as well as natural disasters. Currently, polyISO roof insulation, metal decking, PVC and equipment are seeing major disruptions that are causing project delays. The labor market is tight with most companies reporting smaller than ideal crew sizes. This challenging labor market is increasing the need for overtime to meet project schedules. This, along with wage increases necessary for employers to stay competitive, will continue to drive higher than normal escalation.
Want to discuss the local market position and forecast? Connect with Jeff Smoker, Vice President of Preconstruction in Ohio.
Strong Demand, Supply Chain Disruption and Limited Labor Continue to Drive Escalation
Want to discuss the local market position and forecast? Connect with Linh Le, Vice President of Preconstruction in Texas.
San Antonio, TX
Resurgence in Tourism and Hospitality Impacts Construction in San Antonio
San Antonio continues to have a resurgence in hospitality and tourism, providing opportunities particularly in the downtown area. One noteworthy example is the $450 million Alamo Restoration Project. Cybersecurity and related fields are seeing significant growth and will continue to see increasing investment in the future. Mixed-use and residential sectors are still seeing steady growth in San Antonio and surrounding areas. Skilled labor is at a premium and some trades are experiencing shortages which, along with commodity pricing, is impacting overall project costs.
Dallas, TX
North Texas is Full Steam Ahead
Local Construction Cost Forecast
North Texas is still experiencing tremendous activity in all market sectors. In Higher Education, local universities and community colleges are continuing to expand their existing campuses. Corporate relocation is robust, as more Fortune 500 companies, including AECOM and The PGA, have announced plans to move to the area. Other market sectors, such as mission critical, continue to provide opportunities as new projects are either in the planning or construction phase. To accommodate the influx of people relocating to Texas, specifically North Texas, mixed-use and residential sectors are flourishing. As subcontractors fill up their backlog and the demand for quality crafts people increases, labor will become an issue.
Atlanta, GA
Material prices and lead times continue to increase monthly in Georgia. The latest challenge in the market has been roofing material and polyiso insulation material shortages. A possible solution is alternative material selections to meet project schedule while maintaining the designed R value for the roof system. Additionally, the residential market is still going strong in Atlanta with no slow down on the horizon.
Want to discuss the local market position and forecast? Connect with Kayle Gastley, Senior Vice President of Preconstruction in Atlanta.
Material Prices Increase Monthly and Lead Times Extend
Houston, TX
Oil and Gas Sector Growth Drives Other Sectors
West Texas Intermediate, the U.S. benchmark for light, sweet crude is over $80 per barrel—a level not seen since 2018. This increase, among other positive economical statistics, has triggered a construction recovery in the Houston market. Healthcare is strong, anchored by a $1.8 billion expansion at the Texas Medical Center. The commercial sector is ramping up to accommodate return to work status including 1550 On the Green, a new 28-story, 375,000-SF office building across the street from Discovery Green and the Texas Tower, a 47-story, 1,000,000-SF office tower. Escalation in commodities such as structural steel, bar joist, rebar, aluminum and PVC has greatly impacted construction pricing. Labor costs are also continuing to rise as more project opportunities become available.
Nashville, TN
Want to discuss the local market position and forecast? Connect with Adam Hicks, Vice President of Preconstruction in Nashville.
Steady Growth for Music City
Nashville continues to remain one of the most popular destinations for business relocations and maintains aggressive housing growth to keep up with demand. PWC classifies Nashville as a top-three real estate market for 2021. Oracle's announcement to invest over $1.2 billion and move a portion of their HQ operations to Nashville will result in additional commercial and infrastructure development in the North Bank area. Construction materials and commodities continue to remain in high demand and affect pricing. Mining, logging and construction employment has remained relatively flat for 2021 in the Nashville area. This, combined with the increase in building permits for the 2020-2021 fiscal year in Nashville, continues to place a strain on skilled labor for many construction trades. With this peak in 2021, Cumming is projecting the market to cool going forward in 2022 and 2023.
Los Angeles, CA
The Los Angeles market remains busy with many opportunities for growth. Some long-term union contracts have helped stabilize the escalation of the labor market. Several large-scale hospital projects were recently awarded, which will take some players out of the local market and could lead to trade labor shortages. Price escalation has been impacted like other markets and will continue to rise for possibly the next year. Some of the local bonds that have supported the growth in the community college higher education market are starting to end, slowing some of those opportunities.
Want to discuss the local market position and forecast? Connect with Paul Hackett, Preconstruction Director in Los Angeles.
L.A. Market Remains Strong With Many Opportunities for Growth
San Francisco, CA
According to a recent report from global consultant Turner & Townsend, San Francisco is the third most costly construction market, trailing only Tokyo and Hong Kong. Even with these cost headwinds, demand remains strong in Northern California, led by healthcare, education, mission critical and high-tech markets. According to cost consultant Cumming, total construction volume is predicted to grow by nearly 15 percent by the start of 2022. Trade partners that support these markets are getting busy and more selective on the projects they are bidding. Some workers that left the industry during the COVID slowdown have not returned, putting added pressure on finding experienced builders for large and complex projects. Many materials are facing abnormal pricing and lead time pressure, and we expect to see the market address these challenges over the quarters ahead. We encourage early planning to help teams mitigate the risks of both labor and material costs.
Want to discuss the local market position and forecast? Connect with Mike Nelson, Preconstruction Director in San Francisco.
Construction Labor Market is Reaching Capacity
Portland, OR
Marquee projects are continuing to attract a large number of proposers and fees are still low. Data centers are in high demand and some projects are working 24x7 to deliver on tenant demands. A major healthcare project is likely restarting in November along with other projects in the market that have been on hold. There continues to be industry-wide concern about finding sufficient craft labor as a result of continuing pandemic challenges. Lead times for steel joists, switchgear and roofing insulation are prompting many owners to explore early, direct or other alternative delivery methods. The pipeline of future projects remains strong, and the past 18 months has created an uneasy optimism.
Want to discuss the local market position and forecast? Connect with Steve Clem, Regional Senior Vice President of Preconstruction in Portland.
Pandemic Continues to Bring Uncertainty
Seattle, WA
Construction hasn't slowed down. Apartment construction is showing signs of life with developments previously on hold, cutting loose. Downtown Bellevue is extremely busy. Subcontractors are being selective on pursuing work through 2023 due to current workload, and major labor unions are looking for significant pay and benefit increases. Lead times for materials and equipment are currently a significant issue.
Want to discuss the local market position and forecast? Connect with Alan Dunbar, Regional Senior Vice President of Preconstruction in Seattle.
No Slow Down in Seattle
Tampa, FL
The continued increase of new Florida residents is contributing to increases in residential project developments. We anticipate rising construction costs in the Tampa metro-area to likely continue until the supply chain stabilizes.
Want to discuss the local market position and forecast? Connect with Jeff Courtney, Preconstruction Manager in Tampa.
Increases in Residential Construction Contributes to a Shortage of Trade Labor
Unemployment rates for construction remain very low for South Florida. Demand for residential new housing and new commercial projects remains positive and will continue to affect the labor market. The impact of infrastructure projects likely to be released in 2022 will add to the labor shortages for the region in 2022 and 2023. The Miami Dade area is becoming a hot destination for tech companies, driving the development of new projects in the commercial market. This will also activate other industries around tech. This trend is trickling up to Broward County and Palm Beach County. Meanwhile, higher education and healthcare institutions have started to release small/medium projects into the market for construction, and multiple bigger projects are now in the early stages of development.
Want to discuss the local market position and forecast? Connect with Diego Espinosa, Preconstruction Manager in South Florida.
Residential Demand Continues to Affect the Overall Market in South Florida
Orlando, FL
The continued increase of new Florida residents is contributing to increases in residential project developments and directly affects the labor market. With low overall unemployment rates, especially for construction, monthly increases of material prices and lead times, we anticipate rising construction costs in the Orlando metro and Central Florida areas 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 Construction Continues to Increase, Creating a Shortage of Trade Labor
North Carolina/Virginia
In the greater Raleigh market, major projects in the following sectors are driving optimism: science and tech, healthcare and corporate campus headquarters. This is offsetting declines in education projects and other sectors. Across Virginia, several large projects in multiple market sectors—including higher education, healthcare and data centers—are coming to market in the next three to six months after pandemic-related delays. While the pace of material cost escalation is cooling, strong demand is expected to keep pressure on pricing as labor availability continues to be an issue. This is particularly true in more geographically remote markets throughout the region where bid competition is more limited.
Want to discuss the local market position and forecast? Connect with Will Senner, Vice President of Preconstruction in North Carolina and Virginia.
Strong Pipeline and Labor Shortages Continue to Pressure Pricing Despite Cooling Material Escalation
Washington, D.C.
The current market is busy for the next six months and projecting the same for the next one to two years. The residential, healthcare, life sciences/higher education and office markets are slowly coming back. Projects that were delayed or put on hold due to the pandemic are starting to hit the market, resulting in subcontractors being selective with their bids. Some subcontractors have reduced their profits to offset the significant escalation, while others have had to pass on escalation to clients. Subcontractors are offsetting rising prices by procuring materials early and holding them in storage or getting LOIs to lock in pricing. To combat these challenges, there is a need to be creative with solutions, such as strategic supply chain procurement.
Want to discuss the local market position and forecast? Connect with Apryl Webb, Vice President of Preconstruction, Washington, D.C.
Future Projections Show a Busy D.C. Market
Philadelphia, PA
The labor market is very busy with a shortage in workers, especially in the MEP trades. We are working to help support new initiatives for attendance in local trade schools to help with that demand. The economy in our area is very steady, and we are starting to see increased needs for life sciences construction. Life sciences businesses are taking full advantage of talent graduating from the region's colleges and universities. Healthcare continues to grow, with at least four to five major projects in construction, and many more in the planning stages. Higher education construction is slower to come back online, as schools continue to work through the virtual/in-person balance.
Want to discuss the local market position and forecast? Connect with James Lane, Vice President of Preconstruction in Philadelphia.
Work Continues to Increase as On-Hold Projects From the Pandemic are Released to the Market
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.
Healthcare and Life Sciences Projects Draw From a More Diverse Labor Pool
6 months - 1 year
1 - 2 years
Healthcare, life sciences and higher education market sectors continue to be robust and will continue to keep New York contractors busy. The labor pool is becoming more diversified as clients consider non-union labor in an effort to save money. Agencies are moving more toward design-build delivery methods than they have in the past. Early engagement and transparency with our clients is key to successful outcomes for both the preconstruction and construction phases on all projects.
Life Sciences and Higher Education Sectors Remain Strong, Commercial Sector Gains Momentum
Next 6 months
More life sciences and higher education projects are starting in Southern New Jersey, while commercial and large infrastructure projects are ramping up in the Central and Northeast regions, like Newark. Lead times for structural steel, particularly joists, and MEP equipment have become problematic. Some larger clients with national purchasing agreements are buying long lead items directly in an effort to stay on schedule. Our keys to success include: early engagement with clients, coordinated procurement strategies with owners and soliciting budgets/bids from open shop subcontractors.
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
We have seen increased competition for backlog over the past three months. Construction managers and subcontractors have been taking projects at prices that are at/or below budgets. This has resulted in a slow down of escalation to partially offset the national escalation pace. The market is still busy. Subcontractors have good backlogs and materials still see volatility in pricing and availability, but the pricing is holding steady.
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction.
Competing for Backlog
Market is experiencing significant/abnormal construction price inflation (+5% per annum)
Boston/New England
We have experienced unprecedented continued growth in the Boston market driven by pent-up demand from a year ago when the market was slow. Life sciences, higher education, corporate commercial, residential and now even government work is pushing this growth, with significant expansion in the commercial lab and pharmaceutical sectors. Many subcontractors are at or near capacity with good backlogs for the remainder of 2021 and into 2022. Material price growth has slowed from the pace of earlier this year, but availability remains a major issue. Most traditional long lead items times have increased, some by as much as 100 percent. There is also a disruption in the certainty of delivery dates related to continued shortages of shipping labor. We anticipate that this pressure will continue well into 2022, and will work to mitigate this by collaborating with our local subs and national supply chain management team to help ensure materials are available to meet our clients' expectations.
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction, Boston.
Continued Growth and Pressure on Labor and Materials
Want to discuss the local market position and forecast? Connect with Kayle Gastley, Senior Vice President of Preconstruction.
Miami/ Ft. Lauderdale
N. Carolina/ Virginia
According to a recent report from global consultant Turner & Townsend, San Francisco is the third most costly construction market, trailing only Tokyo and Hong Kong. Even with these cost headwinds, demand remains strong in Northern California, led by healthcare, education, mission critical and high-tech markets. According to cost consultant Cumming, total construction volume is predicted to grow by nearly 15 percent by the start of 2022.
Unemployment rates for construction remain very low for South Florida. Demand for residential new housing and new commercial projects remains positive and will continue to affect the labor market. The impact of infrastructure projects likely to be released in 2022 will add to the labor shortages for the region in 2022 and 2023.
The current market is busy for the next six months and projecting the same for the next one to two years. The residential, healthcare, life sciences/higher education and office markets are slowly coming back. Projects that were delayed or put on hold due to the pandemic are starting to hit the market, resulting in subcontractors being selective with their bids.
Some subcontractors have reduced their profits to offset the significant escalation, while others have had to pass on escalation to clients. Subcontractors are offsetting rising prices by procuring materials early and holding them in storage or getting LOIs to lock in pricing. To combat these challenges, there is a need to be creative with solutions, such as strategic supply chain procurement.
The Miami Dade area is becoming a hot destination for tech companies, driving the development of new projects in the commercial market. This will also activate other industries around tech. This trend is trickling up to Broward County and Palm Beach County. Meanwhile, higher education and healthcare institutions have started to release small/medium projects into the market for construction, and multiple bigger projects are now in the early stages of development.
Trade partners that support these markets are getting busy and more selective on the projects they are bidding. Some workers that left the industry during the COVID slowdown have not returned, putting added pressure on finding experienced builders for large and complex projects. Many materials are facing abnormal pricing and lead time pressure, and we expect to see the market address these challenges over the quarters ahead. We encourage early planning to help teams mitigate the risks of both labor and material costs.
Supply Chain Trends and Insights
As we end the third quarter of 2021, building material supply chains continue to struggle with a supply/demand imbalance. While residential demand remains very high, commercial construction demand is up significantly, led in large part by surging demand for data and distribution centers. On the supply side, manufacturers continue to be challenged by a number of headwinds, including labor shortages, raw material supply disruptions, ground transportation delays, ocean freight delays due to a shortage of workers at ports, and significant imbalance of shipping containers.
Status Key
Stable/Consistent
Trending Down
Fluctuating
Trending Up
Roofing material lead times continue to extend. Roofing system deliveries can be as long as 10 months, depending on the materials specified. The toughest product to get is polyISO insulating panels. Lead times for polyISO are now greater than 10 months. In some cases, polystyrene insulation can be substituted for polyISO. However, many projects are taking advantage of this substitution and now polystyrene lead times can be as long as four to six months, depending on the source.
Lead Time
Price
Roofing Products
While steel shapes, such as wide flange members, are up significantly in price (75 to 130 percent depending on shape and dimensions), 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 remain extended out beyond 40 weeks and decking is out to 25 weeks. In addition, joist and decking prices have increased 300 to 400 percent. In recent weeks, these lead times have started to ease and price increases are slowing.
Structural Steel
Click for further analysis
Steel-based products, such as metal studs and acoustical ceiling suspension systems, continue to escalate. Armstrong has announced an additional increase of 10 percent on all suspension systems effective October 18, 2021. In addition, they are suggesting guidance of an additional five percent for any estimating out beyond February 1, 2022.
Ceilings, drywall, metal studs, flooring, paint, etc.
Architectural Interiors
Lumber is one of the few bright spots in building material supply chains. Both dimensional lumber and panel pricing are down significantly. Dimensional lumber is down 72 percent from its peak in May and is now 24 percent below pricing seen in fall 2020, before the significant run-up in pricing began. Panel pricing is down 64 percent from the May peak and 14 percent below fall 2020 pricing. However, the free-fall in pricing appears to have ended and is now steadying at current levels.
Wood-based Building Materials
Lab casework manufacturers are being impacted by two main inputs: steel and resins (for bench tops). Resin pricing has increased by over 300 percent and steel pricing has doubled. In addition, resin is in short supply and is leading to extended lead times. Overall, lab casework pricing is up 10 to 12 percent and lead times have been extended from 8 to 12 weeks, to 26 weeks.
Lab Casework and Fume Hoods
Demand for appliances continues to be very high. Relief is not expected until Q2 2022 at best. Prices are expected to rise over the next 6 to 12 months by at least three to five percent. In addition to high demand, production is also being limited by the global semiconductor shortage and shipping challenges.
Appliances
Prices are up slightly from Q2, however year over year, pricing for low-rise and mid-rise elevators are up significantly. Lead times are flat compared to Q2 but are up two to three weeks in each category, including escalators. Price and lead times are likely to increase further over the next six months.
Elevators, Escalators, Moving Walks
Prices for copper, PVC, steel and stainless steel plumbing materials are expected to increase over the next six months as demand remains strong and supply chain issues persist. Price and lead time for plumbing fixtures holds the greatest risk over the next six months due to container ship transportation delays and premiums for ocean freight. Non-PPI pricing sources are reflecting higher YTD increase for pipe: up 101 percent for PVC, up 84 percent for carbon steel and up 67 percent for copper.
Plumbing
High demand, shortage of factory labor and supply chain constraints have led to significant lead time increases within the past three months across all HVAC equipment manufacturers. Reported lead times are between two and three time longer than typical lead times prior to the pandemic, while actual lead times being experienced by projects can be as much as four times longer. Air cooled chillers and full custom air handlers are experiencing the longest lead times in the range of 30 to 40 weeks. In order to mitigate risk of late deliveries, projects should add a minimum four week safety factor to all quoted lead times.
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
Pricing for all electrical equipment is up significantly since Q2, as a result of very large demand, reduced labor and increased input costs. Lead time for 600v to 5kV switchgear is also up significantly, now 44 to 52 weeks due to strong demand from data centers and warehousing projects. Busway and solid-state breakers are running 20 weeks and 40 weeks respectively.
Electrical Gear
Price and lead time for electrical commodity items are expected to increase over the next six months due to demand and supply chain constraints.
Electrical Commodity Materials
All major lighting manufacturers have announced price increases in the range of five to ten percent. Prices and lead times are expected to increase over the next six months as demand remains strong and shipping delays and costs increase.
Lighting
Of all the challenges that logistics managers are currently facing, transportation prices and capacity are the most difficult. Volume of shipments are up across the board as consumers in the U.S. continue to buy goods, and ocean carriers do not have enough capacity to meet consumer demand. Spot rates for shipping containers remain elevated and costs for ocean freight are almost 400 percent higher than last year. Prices to ship a container from China to the west coast of the U.S. soared to more than $20,000 per unit in August as the container dislocations continue to create difficulties. Pre-runup pricing was $3,800 per unit.
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.
In mid-September there were a record number of 67 vessels waiting to be unloaded at the LA/Long Beach ports, which account for about 40 percent of all inbound volume from Asia to the U.S. Moving inland, lingering challenges remain: shortages of labor, trucks, chassis and rail equipment are amplifying the problem. Volume is up 18 percent in railroad intermodal units year over year. Problems persist and there has been no relief to shortages of labor. Fuel prices continue to remain elevated, and surcharges are continuing to be enforced. These issues are being experienced at ports globally, and project teams should continue to be aware of extended ship times when determining release dates. Categories to monitor include plumbing fixtures, lighting fixtures, escalators, moving walks and absorption chillers. In some cases, curtainwall and structural steel are impacted. If projects are sourcing glass or fans from Germany, be aware that extended ship times should be expected. Risks: China has implemented a zero-tolerance approach to COVID cases, as risk from the delta variant increases. This means that even a few cases can cause a whole port to be shut down. The second largest port in China went into lockdown for two weeks, and the shutdown created increased backlog in products. If drastic measures continue to be enforced, this could further reduce inventory levels and product availability downstream.
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.
Products that are heavily dependent on raw petrochemical materials are experiencing one disruption after another. Plants that were still struggling to catch up after disruptions caused by Winter Storm Uri have now been hit with Hurricane Ida, taking significant portions of the supply chain offline.
We expect to see these raw material disruptions further impact key building material categories. In addition, the impact of transportation and shipping disruptions is being felt across a wide range of products. Below we take a deep dive into some of the key factors affecting transportation and introduce a new metric - Logistics Managers' Index (LMI) that we will be tracking to gauge the health of key logistical factors.
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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 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.
Hollow metal door pricing is continuing to be impacted by the escalation in steel pricing. Metal door pricing has escalated by 50 percent or more, and lead times have also extended. Typical metal door lead times of four to six weeks are now extended out to 12 weeks or more. The wood door supply chain is experiencing significant disruptions because of lack of available cores. Lead times for wood doors can be as long as 28 weeks. Door hardware has not been impacted as harshly. Lead times for door hardware now stand at six to eight weeks, slightly extended from the typical four to six weeks.
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.
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.
Current Status:
6-12 Month Forecast:
Special considerations:
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.
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.
U.S. Construction Employment
Labor has not been driving construction cost escalation in 2021. Construction unemployment has returned to pre-pandemic levels, hitting a measured rate of 4.5 percent, according to the U.S. Bureau of Labor and Statistics. Average hourly wages rose from $32.16 in February 2021 to $33.25 in September, moderately higher than in traditional years at 4.5 percent in the past 12 months. However, it is estimated that there are nearly 300,000 unfilled construction jobs nationwide so while labor cost inflation is not the immediate concern, labor shortages and therefore production, is a concern.
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 September ABI score of 56.6 is still one of the higher scores seen this year. Furthermore, in the immediate post-recession periods that have been captured throughout the index’s history, ABI scores over the last eight months are among the highest. Following the abrupt downturn last year, recovery is strong with firms reporting plenty of work in the pipeline and strong business conditions.
Strongest conditions remain in the Midwest and South, with some less growth in the Northeast. Firms reporting strongest billings concentrate in commercial/industrial projects, multifamily residential and institutional specializations. View the full September report here.
-50 =50 50+
Decrease in volume
Increase in volume
Neutral
Scoring:
Skilled Labor Index and Common Labor Index
The ENR Skilled Labor Index, which measures union wage scales using carpenters, ironworkers and brick masons, rose 2.6 percent from February 2021 to September. This suggests that non-union markets may be seeing a more significant impact from labor wages and possible shortages, which results in higher wages than union markets.
Construction Spending and Dodge Momentum Index
September brought some stability to major cost indexes. However, regional markets are experiencing cost escalation at varying degrees, largely due to their area project pipelines. Nationwide, commercial construction spending still has a downward trend which is expected to taper and turn up in 2022. This could result in subcontractors passing on higher costs to GCs in all markets.
Construction, Architecture and Labor Indices
Spending
Employment
Labor
Source: U.S. Bureau of Labor Statistics
Source: U.S. Census Bureau and Dodge Data & Analytics
It is worth noting that the construction industry has one of the lowest COVID-19 vaccinations rates in the country, measured at approximately 51 percent. This places the industry at 28 percentage points below the average for all occupations and could make it more susceptible to variants.
Architecture
Source: AIA
Construction Materials and Commodities Pricing
2021 has been a year of sweeping material price increases, with steel and metal products leading the way. Many products are 100 percent more costly than they were a year ago. Driven by challenges in the manufacture of goods overseas, unprecedented shipping and logistics challenges, massive sector expansion in data centers, distribution, semiconductor and pharmaceutical construction, and the disruption from major weather events, 2021 has been the imperfect storm for all entities trying to deliver projects at a recognizable benchmark.
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 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.
The average price of a gallon of gasoline is up $1.20 from September of 2020. While fuel costs are a contributor to onsite 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. The recent increases have been passed on to consumers by way of increased transportation and logistics costs. As costs of fuel and oil have risen, so have costs of other goods that make up the global economy.
Aluminum Price continues to remain elevated as demand is increasingly outpacing supply. The Outlook for 2022 is higher pricing and a supply deficit.
Zinc Prices spiked in October to a 14 year high due to concerns of supply shortages caused by high coal prices in China and production cuts in Europe. Though prices have come down slightly over the past week it is unlikely that there will be much relief.
Nickel Nickel prices continue to rise due to limited supplies as output from Russia and the Philippines declined and inventory levels have dropped. Prices will likely continue to rise as demand downstream is strong.
Copper Prices for copper surged in October partially driven by supply uncertainty surrounding production disruptions in Chile and Peru. Additionally the push towards sustainable energy is keeping demand for copper high. This trend is expected to continue, keeping copper pricing high in the long term.
Lumber and Wood Products
A tapering in the thriving residential construction market has helped lumber-based product prices recede. While still significantly above pre-pandemic values, the downward trend is continuing into Q4.
This graph shows a one-year trend of key lumber and wood products in terms of producer price index.
While cement pricing has fluctuated, it has not been a root cause of construction inflation. The greater challenge in this space has been cement supply and its impact on concrete supply. Logistical challenges from point of manufacture to batch plant to jobsite have been hampering projects, causing construction teams to take extra care to plan concrete deliveries.
Structural Steel Shapes and Rolled Bars
Steel pricing has continued to increase, however, pricing appears to be flattening. We do not expect pricing to fall in the short term, but we do expect pricing to stabilize near current levels. Lead times are also beginning to ease. For example, lead times for bar joists peaked at 52 weeks and are now receding to 40-45 weeks. In addition, decking lead times have eased to 20-25 weeks as steel coil is more readily available.
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. This appears to stem largely from the speculation that the current administration will constrain U.S. oil production and OPEC nations will restrict exports.
Gypsum, Drywall and Insulation
Gypsum-based product pricing has continued to escalate, with a 20 percent increase announced by major manufacturers in October. Lumber pricing, by contrast, has declined significantly and is now below levels seen in the Fall of 2020, before escalation began. Metal stud framing and ceiling suspension system pricing have continued to increase. Major manufacturers have announced recent price increases. Armstrong, for example, announced a 10 percent increase on their metal-based products, including suspension systems, effective October 18. It is anticipated that this will begin to slow as steel’s steady climb has started to plateau.
Click the icons to view interactive one-year index or pricing trends.
Where some major cost indexes offer hope for stabilized pricing, the largest current risk is the supply chain’s ability to deliver products to jobsites in a manner that does not turn traditional 18-month builds into 24-month projects. Project teams are taking numerous measures to accelerate procurement of critical path materials, whose lead times have doubled or tripled, while also investigating alternative products that may mitigate schedule risk.
This graph shows a one-year trend of key metals by price per pound (lb).
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
Aluminum Price continues to rise as demand is increasingly outpacing supply. Outlook for 2021 is higher pricing and a supply deficit.
Zinc Prices have continued to rise to a ten year high as supply outside of Southeast Asia are tight.
Nickel Prices have risen resulting from increased China demand and decreased inventory. Prices will likely continue to rise as demand downstream is strong.
Copper Demand is still elevated but price has declined because South American supplies have stabilized and China auctioned some reserves.
Steve Stouthamer
David Formichella
Robert Cantando
Tom Park
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