Construction material decreases level out, but some increases are expected to continue for the balance Q3 2024

The Q3 2024 Quarterly Construction Insights Report from Gordian examines the numerous variables that influence material pricing, including geography, global events and commodity volatility. Gordian and subject matter experts examine fluctuations in costs, their likely causes, and offer predictions about where pricing is likely to go from here. Here is a sampling of the report’s contents.

Global influences on materials costs

Worldwide events often have a marked impact on the costs of construction materials, although there may be a delay in when that impact is felt. Current situations that are influencing supply and cost include:

• The drought conditions that were inhibiting container traffic through the Panama Canal have eased, and volume there is returning to normal. However, the Suez Canal has been affected by Houthi attacks on vessels traversing the Red Sea, which is having a significant impact on world trade.
• Political tensions between the U.S. and the strengthening alliance among China, Iran and Russian have resulted in higher tariffs on certain materials, such as metals originating in China. This is also likely to affect the supply of rare earth elements needed to manufacture semiconductors, a particular source of concern right now.
• A Canadian rail worker strike is a distinct possibility, which will result in pushing more traffic through facilities on the U.S. West Coast. The overall costs of freight appear to be on the rise.
• A continuing shortage of skilled laborers within the construction industry is necessitating higher wages, which will in turn impact project costs. This increase affects owners already strapped by the high costs of capital, which could potentially create long-term issues with profitability.

Technology’s impact on construction
 

• Artificial intelligence (AI) technology may help inform buying decisions and optimization of resources in the future. Although this is still in a process of evolution, AI is eventually expected to offer significant benefits to supply chain management. 
• Building information modeling (BIM) continues to gain traction through the use of “digital twins” — 3D-generated virtual models that represent physical structures. These models allow for consistent information-sharing among stakeholders and can eliminate material waste through improved project coordination.
• Off-site prefabrication and modular construction methods are mitigating the need for on-site labor, a trend that’s expected to gain traction.
• Drones are already being utilized for monitoring site safety and construction progress. Robotics are in the development process, with the end goal of having them perform repetitive tasks like bricklaying, an advancement which will also offset the need for manual labor.

Pricing trends by geography and commodity

Data shows that Canadian materials pricing is increasing overall, particularly in lumber and masonry. In the U.S., prices shifted upward on both coasts, but fell in the Rocky Mountain region, a trend primarily attributable to the decrease in the cost of structural steel there. Other localized regions saw a variety of increases and decreases. By commodity since last quarter:

• Increasing: framing lumber, copper electric wire
• Decreasing: structural steel
• Stabilizing: concrete block, conduit

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While prices overall haven’t shifted much since Q2 2024, specific commodities are still somewhat dynamic, and global events are expected to continue to exert pricing pressures. In addition, the move toward using more sustainable materials is also exerting a significant influence on supply and demand.

For more detailed information about construction material trends by geography and specific commodities, and to learn the latest predictions by subject matter experts, download the complete Gordian Quarterly Construction Cost Insights Report for Q3 2024 here.