Construction materials

AGC: rising construction material prices drive up project costs

Rising prices for building materials appear to be pushing up construction project costs, latest news shows Associated General Contractors of America (AGC) analyzes federal data.

Association officials point out that although there has been a big jump in what contractors charge for projects, the rise in material prices is even higher.

“After experiencing unprecedented price increases for many materials, contractors are finally passing on more of their costs,” says Ken Simonson, chief economist at AGC. “Meanwhile, supply chain bottlenecks and labor shortages continue to hamper the ability of contractors to complete their projects. “

The producer price index for new non-residential construction – a measure of what contractors say they would charge to erect five types of non-residential buildings – jumped 7.1% from September to October and 12 , 6% in the last 12 months.

An input price index – the prices that producers of goods and service providers such as distributors and transport companies charged for inputs for non-residential construction – were up 21.1% from October 2020. That includes a 1.3% increase since September, adds Simonson.

Simonson also notes that many products, as well as trucking services, have contributed to the extreme rise in construction costs.

The steel mill product price index has more than doubled, jumping almost 142% since October 2020. The indexes for the forms of aluminum, copper and brass have increased 37% in the past 12 months, while the index of plastic construction products increased by more than 30%.

The index for gypsum products such as wall panels climbed 25 percent and insulation costs increased 17 percent. Trucking costs rose 16.3% while the index for diesel fuel, which contractors buy directly for their own all-terrain vehicles and equipment and also indirectly through surcharges on deliveries of materials and equipment, doubled during the year.

AGC officials are urging the Biden administration and Congress to do more to tackle supply chain safeguards that cripple construction companies and the economy at large. They are calling for measures such as additional tariff relief for major building materials.

“Supply chain backlogs are clearly one of the biggest threats to economic recovery,” said Stephen Sandherr, CEO of AGC. “Washington officials must be more aggressive in taking action to get key materials back in motion so construction companies can continue to rebuild the country.”

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