Construction Material Outlook Q1 2024

Construction Material Outlook – Q1 2024

Yellow Up Lumber: Trending up 

In 2023, lumber prices experienced an overall decline following the spikes observed in 2020. Framing lumber prices have decreased by over 10% compared to the previous year, but over the past three months, there has been a slight uptick in prices. While we anticipate minimal variability in lumber prices in the upcoming months, a sustained recovery in the residential market is essential for any significant price changes. 

Yellow Up Steel: Trending up  

A notable characteristic of global steel prices is that they are highly cyclical. Despite witnessing several consecutive months in Q4 of cost decreases and decline in production levels, domestic mill increases are currently happening. This is primarily due to the Auto Workers’ Strike. As auto comes back, steel buyers are willing to build inventory again. However, we have already seen a price increase on steel products in January, and there is expectation that there will be one or two more during Q1.  

Yellow Up Concrete: Trending up 

The cement and concrete market have experienced multiple cost increases over the past two years due to raw material, labor, and freight increases. The transportation freight costs associated with these commodities, due to their weight and specific production locations, contribute to higher prices in certain regions compared to others. Prices at historically elevated levels have recently begun to level out. However, this might be short lived. Consumption in 2024 is expected to rebound as interest rates ease and the positive impact of the Infrastructure Investment and Jobs Act, signed into law in November 2021, is felt.    

Yellow Up Roofing: Trending up 

Commercial construction roofing supplies are experiencing a moderate price increase driven by factors such as rising material costs and lack of qualified workers. Advanced commercial roofing solutions are growing more popular as they are perceived to have a lower environmental impact. Trends include an emphasis on sustainable and energy-efficient roofing materials, increased adoption of cool roofing and the integration of smart roofing systems for improved monitoring and maintenance.  

Yellow Up Drywall: Trending up 

There are many factors, such as technological advancements and product innovation, stringent building codes and regulations, and material availability that affect the growth and pricing of the Gypsum Board Industry. Supplier price increases are currently ongoing. We have already seen material price increases as we get settled into the new year, but inflationary impacts continue with some of the larger cost pressures coming from raw materials and transportation costs

Yellow Up HVAC/Electrical/Plumbing: Trending up

Significant backlogs persist for equipment, particularly in mechanical, electrical, and plumbing categories. Electrical materials, specifically related to switchgear, transformers, and generators along with product specific HVAC equipment are poised for continued escalation due to rising demand and constrained manufacturing capacity. The industry is also witnessing a notable shift away from offshore suppliers, particularly in Asia, in favor of more reliable and stable sources. With the combination of many multibillion-dollar government infrastructure projects stressing supply and inflationary pressures, lead times, especially for critical components, continue to be a cause for concern, necessitating meticulous planning and forward-thinking. MCP has a proactive approach to procurement, leveraging data analytics strategically, and staying attuned to emerging trends which will be crucial in navigating these challenges.    

Summary Analysis

As we continue to ebb and flow through material price influxes due to supply chain constraints, inflationary pressures, and geopolitical stressors, a continued huge factor remains regarding the on-going labor shortage. The lack of skilled construction workers has multiple effects to the industry, such as projects potentially taking longer to complete or having problems with productivity and quality control.   The U.S. construction industry unemployment rate averaged 4.6% for the second straight year, matching the second lowest level on record, while job openings remained historically elevated at an average of 377,000 per month through the first 11 months of 2023. It is estimated that the construction industry will need to attract an estimated 500,000 workers on top of the normal pace of hiring in 2024 to meet the demand for labor, according to the proprietary model developed by Associated Builders and Contractors. To address workforce demand that drives the U.S. economy, Congress must also look toward much needed reforms to our legal immigration system and provide high-demand industries, like construction, with access to new or expanded visa programs.   Other Notable Highlights:  

  • Total US Construction Starts fell by 6.6% year on year (y/y) in Q4 2023 
  • Civil Projects, such as, Infrastructure, Roads, Wastewater Treatment Plants, etc., are anticipated to grow 12.7% 

Careful project selection by building type and geography remains strategically important for industry professionals. While forecasting the ups and downs of 2024 is extremely difficult, through MCP’s solutions-driven Preconstruction Service processes, we can dig in early and help plan and analyze for items such as material lead-times, supply chain issues, cost-effective building layouts, as well as assess building costs through conceptual cost assessments and subcontractor communication. Understanding these items early on allows Owner groups to make informed project planning decisions as we continue to navigate through many unknowns.  

 

Disclaimer: The information contained in this document is based on general market research and current and past experience in the construction industry and represents estimations and opinions only. Any reliance, action, or inaction based on any of this information is at your own risk and MCP has no responsibility, obligation, or any liability relating thereto.