Commodity prices have been increasing across the board. Overall construction costs for the 12-month period through the end of August 2021 rose by 4.5 percent, with material costs leading the way with a massive increase of 23.1 percent. Many products, as well as trucking services, contributed to the extreme runup in construction costs.
STEEL AND OTHER BUILDING MATERIAL COSTS
Between October of 2020 and November of 2021, the price of steel rose 142 percent, according to the Producer Price Index. Aluminum mill shapes rose 41%; copper and brass mills shapes rose 38%; plastic construction products 33%; gypsum rose 21%; and insulation materials rose 17%.
GEOPOLITICAL EFFECTS ON CONSTRUCTION
As the world awaits the next moves of Vladimir Putin, the construction industry is bracing for what seems like the inevitable invasion of the Ukraine by Russian forces. If this conflict is anything like wars in the past, we can expect the costs of building materials to rise significantly. During the Iraq war, the price of lumber soared. Even though it is unclear what the United States’ involvement will be, if any, general contractors can still expect a chain reaction to some degree.
Another factor to consider is the tariffs the Trump administration placed on China, Europe, and Japan. There was a 25 percent tariff placed on steel and a 10 percent tariff on aluminum, dating back to 2018.