As I write this in late October residential construction has slowed a bit due to higher mortgage interest rates, but commercial and industrial construction remains strong. We’re also anticipating increased road and bridge construction in 2023 due the infrastructure bill passed by Congress a few months ago causing a lot of new road and bridge construction to start.
We have had several big wins lately so we’re not seeing any slowdown on the commercial side of our business.
As the market has flattened out a bit we are seeing price increases slowing and even going backwards on some products. See below for more detail.
As metal scrap pricing slid slightly again in October, metal-based commodities are continuing to soften as well. Domestic rebar mills have resisted price reductions, but they have occurred. Ample stock coupled with softer demand, has pushed manufacturers and large-scale wholesalers to discount material to move inventory. Brokers are also having an impact on the marketplace by moving large volumes of rebar at aggressive prices to try and make a profit in volume sales. There are indicators that the rebar market may continue to slide through the winter months but does not appear to be at the same pace it increased over the past year.
The wire mesh reinforcing market has not done as well of a job solidifying a bottom. With mesh pricing tied so closely to scrap and wire rod pricing, any sequence of quick decreases in scrap or rod costs can send the market tumbling. Manufacturers are sitting on high inventory levels and are looking to move product now before any future decreases. Wire mesh lead times are now more dependent on available trucking that actual sitting inventory. Loads of standard sizes and gauges are shipping within one or two weeks. There is not strong sentiment that the bottom of the mesh market will be found within the next months’ time.
There has not been much change in polyethylene sheeting prices in the past month. Inventory levels and production remain strong with lead times on most standard sizes being two weeks or less. There has been opportunity for savings when purchased in bulk quantities, but pricing on single truckload orders has not changed with any significance.
Lumber has had a slight rebound over the past few weeks. SYP pricing has strengthened with most mills claiming to be sold through the first week of November. Most sizes are being sold right at print or slightly higher, with the only exception really being 2×4’s, with those being sold slightly under print. SPF also appears to be in the rebound. One Canadian mill has already announced a curtailment of production for the remaining of the year effective immediately. This has pushed some buyers who may have been sitting idle back into activity and helped solidify the market.
Contractors’ input costs declined again on balance in September, while bid prices rose, according to Bureau of Labor Statistics (BLS) data posted on October 12. Specifically, the producer price index (PPI) for material and service inputs to new nonresidential construction dipped 0.2% for the month, while the PPI for new nonresidential building construction—a measure of the price that contractors say they would bid to build a fixed set of buildings—rose 0.4%. The bid-price index rose 24.1% year-over-year (y/y), while the input index climbed 12.6%. AGC posted tables of construction PPIs.
Click here for the latest update on the construction economy from Ken Simonson, the chief economist of the AGC.