Due to the rising costs of oil, high demand from commercial and residential builders, tariffs and delays from COVID-19, prices for steel, lumber, sealants and geotextiles have hit record highs. Steel prices, according to The Fabricator, have risen 160% from August 2020, though steel prices could soon decline from $1,180/ton to $600/ton. Lumber prices have also skyrocketed, with a 112% rise over the past six months. Natural gas and unprocessed energy materials have experienced huge year-over-year increases as well, rising 178.3% and 96.7%, respectively. Crude petroleum has seen prices rise by 83.4%.

The U.S. Commerce Department reduced tariffs on softwood lumber to 9% in December 2020, but the effects are still trickling down to builders.
“Material prices continue to rise,” says ABC Chief Economist Anirban Basu. “With the global economy reawakening from its slumber, demand for key inputs is expanding. Meanwhile, supply continues to be constrained by many factors.”

Contractors are confident that sales and backlogs will also increase in the near future (according to ABC’s Construction Confidence Index). “As the COVID-19 pandemic fades, suppliers will be better positioned to respond to demand. That will help moderate price increases at some point, though in the very near-term, contractors should anticipate additional cost escalations,” Basu says.

Although Basu admits that “the supply was not ready for the demand,” this perfect storm of factors could be over by Fall 2021, leaving contractors to decide how to cope in the short term. With a national infrastructure bill on the horizon (covered on pg. 10), construction volume is only going to increase—and demand for materials will certainly heighten in kind.