Based on market research by MCP Group 3/31/2022
Please see our summary analysis at the end of this information for our recommendations on moving forward with your project successfully.
Construction Material Outlook – Q2 2022
Lumber Market: COSTS TRENDING
As predicted in our last report lumber prices slowly crept up after the first of the year reaching a YTD high on January 13th at $1,330/MBF. After that it was a “roller coaster ride”, with prices diving down to $935/MBF by February 1st then climbing again to $1,225/MBF by the end of the month. Then trending back down during the month of March to around the $1,100/MBF mark.
The lumber industry continues to play catch up due to low domestic production versus the demand for new home construction. This coupled with the November 2021 historic flooding in British Columbia and Washington (top lumber producing areas) and supply chain bottlenecks have kept lumber prices far above pre-COVID levels (over 250% higher).
Looking deeper into 2022, we expect lumber prices to move gradually up and down but remain at or slightly above $1,000/MBF through the 3rd quarter of 2022.
Plumbing/HVAC Market: COSTS TRENDING
Q1 of 2022 saw HVAC equipment suppliers announce increases of 5% - 20% due to supply chain challenges, raw material cost increases, increased labor rates, and elevated transportation costs. Additional increases of another 10% - 15% are anticipated to be announced in the month of April. Lead times on HVAC Equipment were running 6 – 8 months on certain equipment in late 2021. These lead times are beginning to reach the 8 - 10-month range with no relief in sight. Early bid packages and early ordering of equipment are becoming a must to keep project delays from occurring.
Plumbing material suppliers announced 10% - 15% increases effective January 1, 2022, and quickly announced additional increases of 5% - 7% effective February 7th, 2022. Copper and PVC materials remain extremely volatile moving into Q2.
There is some hope that plumbing and HVAC materials will stabilize in late-2022 as supply chain issues are resolved but there is no certainty at this point.
Electrical: COSTS TRENDING
Aluminum conduit and wire manufacturers announced cost increases of 12% in February with additional increases expected in Q2. With Russia being one of the world’s largest aluminum producers, the future is very uncertain for aluminum conduit and wire pricing. Copper wire has seen significant increases in the past year, and future increases in 2022 are to be expected as demand continues to increase. Lighting manufacturers announced another round of price increases in early March of 10% -15% due to inflationary issues, transportation costs and global supply chain disruptions.
Structural/Miscellaneous Steel and Metal Studs: COSTS TRENDING
Early 2022 saw slight declines in steel prices, which was originally expected to continue through Q2. Russia’s invasion of Ukraine in late February caused steel prices to swing quickly upwards due to supply concerns. Russia is the fifth-largest steel supplier in the world and recent sanctions placed on the country have limited global steel supply. Russia and Ukraine are also both key producers of pig iron, which is a key raw material used in steel production. The pig iron shortage to North American mills points to further cost increases in Q2. Bar Joist lead times remain extreme and the use of wide flange beams and light gauge joists are becoming more and more common place in lieu of open web bar joists.
Asphalt: COSTS TRENDING
The start of 2022 saw the asphalt market increasing inventory and a slowing of demand which pointed to a downward trend in asphalt pricing. The Russian invasion of Ukraine ended this trend with crude oil prices soaring the last few weeks. As previously reported, crude oil pricing has a direct effect on asphalt prices which leaves this market very volatile for the near future.
Relief is not expected until late 2022.
Roofing: COSTS TRENDING
The roofing industry continues to face obstacles of supply chain disruptions, raw material availability, labor shortages, and increased shipping cost. These factors with the increased demand for roofing services in 2022 are causing additional cost increases. Manufacturers announced increases of 5% - 10% effective 1/31/22. The demand for roofing services and materials remains high going into 2022. Lead times on asphalt shingles, membrane roofing, and roof insulation have crept up to 8-10 months on certain materials. Selection of available materials during design is critical during the next few months as there is currently no relief in sight as it relates to price volatility and lead time issues. If relief were to come, it’s not expected until late 2022 at the earliest.
Expect relief in Q4 of 2022 or Q1 of 2023.
Appliances: COSTS TRENDING
The extreme demand for Appliances mixed with raw material and chip shortages is contributing to higher prices and longer lead times in 2022. Demand for appliances is forecasted to stay very strong with production constraints not expected to be resolved anytime soon. Owners should remain flexible to appliance selections, especially when it comes to model and color choices to obtain appliances in a reasonable timeframe.
The prediction for appliance production to catch up with demand is not expected until Q1 of 2023.
Summary Analysis: Overall Cost Trends
Based on our research and communication with industry partners, construction material costs continue to rise, with construction materials an average of 24% higher than one year ago. The Russian invasion of Ukraine has led to increased concerns of material escalation and availability. Owners should be ready to move quickly at the beginning of a project to procure materials to keep projects on schedule. This may require paying for and storing materials long before work actually begins. Owners should also make sure that escalation contingencies are being carried in addition to general contingencies to combat constant inflation. At this time, it appears that relief may not be in sight until late 2022 or early 2023. Open lines of communication between Owners, Designers, and Contractors are essential to successful projects in 2022.
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.