High aluminum prices are the latest concern for construction industry

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High aluminum prices are the latest concern for construction industry

Soaring aluminum prices are the latest concern for a construction industry that is grappling with higher materials and labor costs as the US economy emerges from the pandemic.

The price of aluminum sold on the London Metal Exchange during three months has increased 2,907-tonne this year, reaching $1,927 per tonne. Prices were higher than their pre-pandemic levels.

Aluminum is integral to residential construction and used to make everything from siding and gutters to insulation, nails and HVAC equipment, said Jerry Howard, president of the National Association of Home Builders. Aluminium is also used for roofing, fencing and many other products.

Higher aluminum prices have translated into higher material costs for builders as the price of building materials made of aluminum has increased 15 - 25% over that period, he added.

Higher aluminum costs aren t the only headache for homebuilders.

Lumber prices earlier this year had climbed by as much as 316% since the beginning of 2020, adding $36,000 to the cost of building an average-sized new home.

Other essential materials including iron, copper, steel and natural gas have also seen their prices skyrocket.

It s not just materials costs that are going up, so much is being added.

Builders and contractors are also dealing with higher transportation and labor costs. In addition, there aren t enough roofers, glaziers, plumbers, electricians and other types of workers to fill the needs of the construction industry.

All of this is pushing in the same direction, causing project prices to rise, said Anirban Basu, chief economist at Associated Builders and Contractors. Some project owners are saying "no more for me, I'm done" is still needed. An Associated Builders and Contractors report released Tuesday said its construction backlog calculator was down by 7.7 months in August, down 0.8 months from July. The reading was 0.3 months below its year-ago level.

The drop in confidence mirrors a loss of homebuilder sentiment that was reported last month by the consumer trade group Realty. Wells Fargo housing market index of the National Association of Homebuilders fell 5 points in August to 75, the lowest since July 2020.

Still, ABC s Construction Confidence Index showed readings for sales, profit margins and staffing levels all remained above 50, indicating expectations of growth over the next six months.

The cure for high prices is high prices, Basu said.

These lofty prices for aluminum, copper, steel and other inputs to production induce firms to increase short supply, he added. So it should be the case that some relief for the construction industry and other products-producing segments of the economy will be achieved at some point in 2022.