Construction Commodities Prices Continue to Stabilize as Digital and Energy Transformation Continue to Drive Industry Growth
Global construction consultant Linesight today 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:
- Non-residential 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 downwards. 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 downwards thanks to lower production costs and less costly imports. This will be slightly offset by a rising demand for non-residential buildings and infrastructure.
- Cement prices rose by 1.5% in Q2 2023 and although they are increasing at a slower pace, they will probably remain elevated due to high demand and production costs. Non-residential 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, non-residential fixed investment, government spending, and private inventory investment. The Consumer Price Index (CPI) 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 (YoY) basis.
The report shows that robust growth is expected in the infrastructure and high-tech manufacturing sectors, thanks to policies like the CHIPS and Science Act, the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act. Manufacturing construction has doubled since late 2021, and the data center market is attracting investors, with 314 new hyperscale data center sites in development for 2024. Challenges for the battery manufacturing sector include limited construction expertise, regional bottlenecks and the need to localize the value chain for supply chain resiliency.
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."
To request the full report, please click here.
About Linesight
Linesight is a multinational construction consultancy firm with over 49 years' experience, providing cost, schedule, program, and project management services to a multitude of sectors including Life Sciences, Commercial, Data Centers, High-Tech Industrial, Residential, Hospitality, Healthcare, and Retail. Linesight's specialist project teams, each with specific skills and experience, provide better predictability of project outcomes, faster project delivery, greater cost efficiency, and maximum monetary value for its clients. For further information, please visit http://www.linesight.com.
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