The overall cost of construction materials jumped 0.9% for the second month in a row, and 4.9% over 12 months, according to a mid-February report by the Associated General Contractors of America (AGC).

Among these essential construction materials, diesel fuel prices rose 3.2% in January and 17.7% for the year. "As long as there's turmoil and uncertainty about crude oil supplies being cut off in the Middle East, we can expect volatility and probably higher prices," says AGC Chief Economist Ken Simonson.

Despite rising oil prices, asphalt is holding steady. Asphalt prices depend more on paving contractor demand, says Simonson. With the number of paving projects leveling off, asphalt prices are not likely to increase, and could even drop. Concrete products were also flat over the past year, with only a 0.1% rise in January.

"The stimulus legislation provided a lifeline to public works projects, but that money has almost all been obligated and many projects are already completed," he tells PUBLIC WORKS. State and local agencies are looking at even tighter budgets than before stimulus funding became available, and Simonson expects public works budgets to shrink for several more years. Fortunately for public works departments, higher materials costs shouldn't affect project estimates in the near-term.

Contractors are working on tighter margins, between rising material costs and weak demand for public and privately-funded construction. "There are more contractors bidding on projects so bid prices are holding steady - and dropping. Until the supply of available contractors matches the low demand for public works projects, they won't be able to raise their prices," says Simonson. "Unfortunately, some of those contractors will be going out of business."

Other material cost increases, for the month and year respectively, included:

  • Steel pipe and tube - 2.8% and 17.8%
  • Prefabricated metal buildings - 5.2% and 12%
  • Fabricated structural metal - 1.6% and 3.1%
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