Construction Commodities Prices Continue to Stabilize, Digital + Energy Transformation Drive Industry Growth

Global construction consultant Linesight released its Q2 US Country Commodity Report , noting that commodity prices are continuing to stabilize, albeit at elevated levels, with the GDP rising beyond expectations and signs of cooling inflation. Digital transformation is driving rapid expansion in the data center and high-tech industrial sectors in the United States supported by federal legislation such as the CHIPS and Science Act and the Infrastructure Investment and Jobs Act. This is presenting some challenges namely in skilled workers to deliver the facilities, as well as a growing need to identify new sites and locations to meet the digital infrastructure requirements into the future.

While commodities prices are generally stabilizing, the increased demand from such mission-critical facilities will maintain inflated levels when compared to pre-pandemic levels.

The data in the report suggests:

• Nonresidential construction is likely to grow by 8% in 2023, but construction overall is expected to contract by 2.5% due to weakness in residential building.
• Lumber prices have been relatively stable in recent months when compared to the volatility recorded over the past two years. Due to the housing construction downturn, they will continue trending downward. Prices spiked in June when wildfires shut down mills in Canada, but demand overall remains weak.
• Copper prices have dropped by 4.8% since last quarter and are likely to remain volatile as high interest rates and government spending programs and increased production in electric vehicles and renewable energy will likely buoy copper prices for the next two quarters.
• Steel rebar prices have come down from the highs of Q2 2022 and will likely continue edging downward thanks to lower production costs and less costly imports. This will be slightly offset by a rising demand for nonresidential buildings and infrastructure.
• Cement prices rose by 1.5% in Q2 2023 and, although increasing at a slower pace, they will probably remain elevated due to high demand and production costs. Nonresidential projects (especially infrastructure) are gaining momentum, which will contribute to upward pressure on prices.
• The US GDP expanded at an annualized rate of 2.4%, reflecting an increase in consumer spending, nonresidential fixed investment, government spending and private inventory investment. The Consumer Price Index rose by 3% in June, the lowest annual increase since March 2021, with housing costs contributing the most to inflation, while the energy index fell by 16.7% on a year-on-year basis.

Patrick Ryan, executive vice president for the Americas at Linesight says, “We’re seeing cautious optimism for the construction industry, but skilled labor shortages and high interest rates remain ongoing challenges impacting program delivery and cost. As secondary and tertiary markets begin to attract major developments and, as a result, may experience more labor pressure, we are advising clients to keep a close watch on site selection for their projects and the continued use of risk mitigation strategies.”

Click here to request the full report.