Report: Construction materials costs could kill contractor businesses

As the cost of construction materials go up, the cost of finished homes and buildings has made little improvement, threatening the building industry’s solvency, according to a report from the Associated General Contractors of America.

Construction materials and fuels climbed in price over the last year, according to the report. The price index for diesel fuel jumped 5.7 percent in September, following a leap of 8.7 percent in August. Prices for copper and brass mill shapes climbed 3.6 percent in September. The indexes for aluminum mill shapes and lumber and plywood each rose 1.1 percent in the latest month, while the price of steel mill products increased 1 percent.

At the same time, the price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, as well as the indexes for subcontractors’ work, were mixed for the month.

The index for new industrial buildings decreased 0.2 percent from August to September, while the index for new school construction slipped 0.1 percent for the month. The indexes for new office and warehouse construction were unchanged.

“The latest surge in materials costs may push subcontractors and some general contractors into insolvency, following years of razor-thin margins and shrunken levels of activity,” said Ken Simonson, chief economist for the construction trade association. “Most contractors have no ability to pass on unexpected cost increases.”