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Construction costs, already making the lives of developers and builders difficult, are expected to rise this year and in 2009 and in 2010, according to a report by the Associated General Contractors of America.
Some, however, are expected to go up more than others. Here’s a look at how pricing on some of the materials should shake out in 2008, according to the group.
• Steel: An increase over 2007 of about 5 percent, characterized as a modest increase, given slowing demand for construction and the weak dollar.
• Concrete: A small 2 percent to 4 percent increase after a 3.3 percent increase in 2007.
• Copper: A jump of 10 percent or more. While copper prices were down 3.8 percent in 2007, copper was up in February by 40 percent from the same time a year ago.
And here are a couple of excerpts from the report, explaining why prices on construction materials are expected to continue to be up by 6 percent to 8 percent for the next several years:
“As long as demand is rising sharply in large developing countries such as China, India and other East Asian and Middle Eastern nations, there will be upward pressure on prices. Supplies of copper and oil are likely to remain tenuous, leading to frequent price spikes. Even products made from abundant raw materials, such as steel, are likely to experience price jolts when the exchange rate of the dollar makes U.S. scrap iron cheap for foreigners and foreign steel expensive for U.S. customers.”
Second, construction will always be dependent on physical delivery of heavy, bulky, relatively low-value materials for which transportation and fuel costs are a major part of the delivered price …Growing transportation bottlenecks and rising fuel prices will have a greater impact on construction than on most other industries or consumers.”
