Construction materials costs likely to rise

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The cost of construction materials climbed much less in 2012 than in the two previous years and mostly stayed in line with bid increases.

Materials costs were up an average of 1.3 percent year-over-year in December. That subdued change came as a relief to the construction industry after increases of more than 5 percent in 2010 and 2011, according to a report from the Associated General Contractors of America

Association leaders said the price decline was likely to be temporary, noting that the vast majority of contractors predict materials prices will rise in 2013.

“Moderate price swings for several materials last year gave contractors some breathing room, but future price spikes could push many firms into the red,” Ken Simonson, chief economist for the construction trade association said in a statement. “Contractors still have not recovered from the cost increases they had to absorb in 2010 and 2011.”

The construction economist attributed the mild annual materials price increase to moderation in fuel, metals and paving prices, which offset steeper jumps in several materials used in residential building. The index for steel mill products fell 7.9 percent in 2012 after leaping more than 12 percent in both 2010 and 2011. The index for aluminum mill shapes decreased 1.6 percent, while copper and brass mill shapes increased 1 percent. Diesel prices climbed 1.8 percent, the smallest amount since 2008. The indexes for concrete products rose 2.4 percent and asphalt paving mixtures and blocks, 4.4 percent.

In contrast, the index for gypsum products soared 14 percent, which Simonson said reflected the demand from new apartment and home construction, along with renovations of office and retail space. Other building products with substantial price increases included lumber and plywood, 10.8 percent; architectural coatings, such as paint, 10.1 percent; insulation materials, 5.1 percent; and plastic construction products, 4.7 percent.