Report: Materials prices up 20 percent in 2021

Prices of construction materials jumped nearly 20 percent in 2021, despite moderating in December, according to an Associated General Contractors of America (AGC) analysis of government data.

Association officials say contractors rate materials costs as a top concern for 2022, according to a survey released by AGC predicting the industry’s outlook for this year.

“Costs may not rise as steeply in 2022 as they did last year, but they are likely to remain volatile, with unpredictable prices and delivery dates for key materials,” says Ken Simonson, AGC’s chief economist. “That volatility can be as hard to cope with as steadily rising prices and lead times.”

In the association’s 2022 Construction Hiring and Business Outlook Survey, material costs were listed as a top concern by 86 percent of contractors, more than any other concern. Availability of materials and supply chain disruptions were the second most frequent concern, listed by 77 percent of the more than 1,000 respondents.

The producer price index for inputs to new nonresidential construction – the prices charged by goods producers and service providers such as distributors and transportation firms – increased by 0.5 percent in December and 19.6 percent in 2021 as a whole.

Those gains topped the rise in the index for new nonresidential construction – a measure of what contractors say they would charge to erect five types of nonresidential buildings, according to Simonson. That index climbed by 0.3 percent for the month and 12.5 percent from a year earlier.

Prices moderated for some construction materials in December, but still ended the year with large gains, Simonson says.

The price index for steel mill products rose 0.2 percent in December, its smallest gain in 15 months, but soared 127.2 percent in 2021. The index for diesel fuel dropped 5.3 percent in December but increased 54.9 percent for the year. The index for aluminum mill shapes also saw a loss in December (4.9 percent) but an overall gain throughout 2021 (29.8 percent). In a similar trend, the index for copper and brass mill shapes fell 3.3 percent in December but rose 23.4 percent over the year.

Some prices, however, accelerated in December. The index for plastic construction products climbed 1.3 percent for the month and ended 2021 up 34 percent. Lumber and plywood rose 12.7 in December and 17.6 percent for the year.

AGC officials say rising materials prices threaten to undermine an overall strong outlook for 2022. They urge the Biden administration to reconsider its plans to double tariffs on Canadian lumber and leave other trade barriers in place that artificially inflate the costs of key construction materials.

“Making lumber and other materials even more expensive will not tame inflation, boost supplies or affordable housing or help the economy grow,” says Stephen Sandherr, AGC’s CEO. “Instead, the administration should be removing tariffs and beating inflation.”