Q2 2023: Materials Updates

General:

2023 material pricing is trending from flat pricing to declining prices as the economy navigates through recession risks, rising interest rates, and impacts from continued inflation. Overall, the US banking system appears healthy however the smaller regional banks are facing difficulties and these smaller banks are vital in the construction sector impacting construction starts and ultimately material demands and pricing. The recent decline is a turn of events from the past 2 years. Material prices increased throughout 2022 and remained elevated overall at year’s end. 2022 was a slower rate of increase than 2021 as the overall materials market experienced an increase of 18.6% as a whole in 2022.

The flattened construction market is playing a significant role in material prices. Residential construction has declined 16% this year and non-residential building shows an overall 14% drop from 2022. Construction markets on the upswing include 1) manufacturing due to company’s reshoring seeking product from near shore and the computer and battery explosion, and 2) large public works projects such as infrastructure, education, water/sewer/waste, and power projects.

Transportation and Freight:

Data shows that 40-foot shipping container rates from Asia to the US decreased by approximately 80% since this time last year. Highway transportation trucking cost have shown a decline of 10% over the past year though still facing some continued challenges; Diesel prices are still fairly high averaging $4 per gallon and there is a driver shortage to the tune of needing 1.2 million more drivers in the next 10 years.

Metal Stud Framing:

Steel framing started to peak at the end of 2022. In Jan, steel dropped 10% and then dropped another 5% by the end of Feb. In the beginning of March, things turned for the worst and steel increases were being announced weekly. We presume the increases were to stop the sliding prices. Even though price increases of a total of 30% were announced, May 2023 saw the everyday steel costs came back up 15% to the same level they were at during the peak in December 2022. Today, we are starting to see numbers quoted back down 20% for any project that is starting in the 4th quarter 2023. The steel manufacturers had 3 months of increased purchases. That steel will be in the market in June, July and August. The lower cost steel will be available for projects later in the year. Gyp Board Products: Gypsum products have held steady. The manufacturers tried to get a Feb increase of 10% across all products. With residential building down and commercial building drying up, there was no demand to get the increases that they wanted. The only products that went up were the glass mat products such as Densglass Gold used for building exterior substrates. The ingredients required to make glass mat are still having supply issues and board manufacturers were not profitable on those specialty products. Framing/Gyp Accessories: We continue to see steady prices with these products following the significant increases due to the impact of surcharges to the consumer due to increased overseas shipping costs compounded by high fuel prices. However, container pricing has leveled off while fuel prices are still high, they are not as high. It will take a few more months to use up current high- priced inventory until the lower shelf pricing is seen.

Insulation:

Insulation prices have held this year following a price increase frenzy in Oct 2022, another increase of 12% effective Dec 2022 and yet another 7% increase came out Jan 1st, 2023. The insulation manufactures traditionally try to get a Q4 price increase, but nothing has been announced.

Roofing Commercial Flat Systems:

Membranes materials have declined almost 19% since April 2023. Pricing was steady in the first quarter but has since made a drop due to stabilizing raw materials. Additionally, manufactures have been producing membranes 24/7 since the start of the year to catch up with projections. Now overstocked in warehouses as construction demand has slowed. Projects quoted mid-March for membranes were $1.78/ sq. ft. Today, the same material @ $1.43/ sq. ft. We are also seeing reductions with the ISO rigid insulation (the most specified type for roof assemblies) from $48.50/ bd. Ft. to $41.00/ bd. Ft. This is also due to lower raw material costs. Lastly, Densdeck has been stable since Aug 2022. Securerock has lowered their price due to overstock. Price quotes to contractors are now holding for 90 days, trending away from “no holding” of prices at all in the recent past.

Lumber & Plywood:

Since the beginning of 2023, we have seen some price declines that rebounded, and spikes since have receded. The general lumber price trend for 2023 is projected to range from flat to overall declines. Many expect softwood lumber to decline us much as 30% in 2023. Plywood pricing is expected to decline at a rate of 20% throughout 2023.

EFIS Plaster Products:

Acrylics opened the year with 10% increase. So far it has been idle and we don't expect any more increases for the year. Cement Plaster and Stucco Products: Portland Cement and Stucco used for plastering saw a 10% increase in 2022 and similar increases in Q1 of 2023. Continued price increases are predicted due to scarcity of cement product.

Structural Steel:

Structural steel pricing has been on the rise since Jan with an approximate 9% increase; however, it is flattening out now. Over-all there seems to be a reduced demand for structural steel. Production numbers have shown a modest decline this year showing a capability utilization rate was 75%. Coming off an average price increase of 20% by the end of 2022, we are expecting flat to reduced steel pricing for the rest of 2023.

Concrete:

Concrete pricing continues to soar. Ready mix concrete (RMC) has increased at a historic pace. Up nearly 15% in the last 12 months and still climbing. This continuation of increases has trended since Jan 2021. A major contributor to concrete price increases is the closure of a large limestone quarry in Mexico. Another factor is the scarcity of cement mix, one of concrete’s main ingredients. There does not appear to be any relief in the near future.

Copper Wire & EMT (electrical):

Sales for Insulated Copper Wire products for Q1 2023 were down approximately 9% compared to Q1 2022. This follows an increase of copper prices in Q4 2022. Copper seems to be continuously slipping through 2023 and is now at the lowest price seen in 5 months.

Sheet Metal (HVAC Air Dist.):

The global sheet metal market growth is estimated to increase significantly in the next 5 years, however material prices have leveled off in 2023 and even seen some recent reductions. HVAC Equipment: We have already seen price increases in the market early 2023 mostly driven by the new minimum efficiency SEER2 standards and refrigerant changes. This pricing has been realized and as of late, pricing has flattened. Lead times for projects are quoted at 40 weeks.

Plumbing Cast Iron and Copper Pipe:

Cast pipe has not had any movement since April 2022. The pricing has definitely leveled off. On the other hand, the copper pipe market continues to grow with an increased demand. The latest projections reveal expected growth of 5 million tons between 2023 and 2028, growing at a Compound Annual Growth Rate of 3%.