Dallas is crowded with cranes as area construction booms. But even as the Metroplex grows, price volatility is a fact of life.
“It’s been trending upward,” says Larry Knox, executive vice president at Bob Moore Construction.
Price volatility for construction materials, such as steel, is a national issue, driven by both economic growth and tariffs levied on foreign steel. An analysis of U.S. Department of Labor data by the Associated General Contractors of America (AGC) shows the price of new non-residential buildings accelerated in October.
“Contractors and subcontractors raised their bid prices in November to make up for past cost increases, but the cost of goods and services that they buy rose even faster,” says Ken Simonson, the chief economist for the AGC. “That makes further bid-price increases likely but also implies some contractors will just stop bidding on projects where costs are too unpredictable to ensure they can be built profitably.”
The U.S. producer price index for construction industry inputs has risen 6.6 percent for the past 12 months. Metals and petroleum products have had the steepest increase from October 2017 to October 2018— 27 percent for diesel fuel, 18.2 percent for steel mill products, 11.6 percent for asphalt paving mixtures and blocks and 8.2 percent for aluminum mill shapes.
“It appears the tariffs imposed on steel, aluminum and thousands of Chinese imports are starting to affect the cost of many items used in construction,” Simonson says. “As inventories of goods purchased before the tariffs took effect are depleted, contractors are likely to face even higher costs.”
Knox says volatility in the metals market is acute. Bob Moore’s steel suppliers will hold a price for just 15 days, he says.