From NAHB
With its price almost doubling since the start of the year, copper is the latest commodity causing headaches among builders.
Record levels of construction activity, an abnormally destructive hurricane season and a changing global marketplace have forced up the costs of building materials faster than overall infl ation, according to National Association of Home Builders economist Michael Carliner.
There are about 440 pounds of copper in a new 2,100-square-foot, singlefamily home, according to the Copper Development Association ? 200 pounds in wire and another 175 pounds in pipes and plumbing fi xtures.
Based on that estimate, Carliner calculates that increases in copper prices have boosted the price of a modest-sized home by more than $1,000 in the last three years, or $500 in just the last six months.
Although an ?explosion? in copper prices earlier this month, driven largely by speculation, is already showing signs of being partially reversed, Carliner noted that the rising price of copper has only lately been making its way into manufactured items used by builders, and further price increases are likely.
?Copper prices are likely to remain high and prices for many copper-using materials and products will become more expensive,? he said. ?Air conditioning equipment, for example, uses a lot of copper, but the prices haven?t adjusted.?
As a benchmark, Carliner cited Bureau of Labor Statistics indices showing that the producer prices of materials used in singlefamily construction were up 6.9 percent for the 12-month period ending in April, and that prices were up 7.8 percent for multifamily building. However, ?with tight supplies and increases in transportation costs, further price increases were also imposed in the distribution chain, so that the cost to builders has often increased by a greater percentage.?
While the simmering down process now underway in the housing market would suggest relief on overall materials prices and supply is on the way, a resurgence in nonresidential construction will offset some of that slack, Carliner said, and the best hope for improvement could come from increased manufacturing capacity.
Unfortunately, most of that capacity won?t arrive this year. Moreover, for some products, particularly metals and cement, price increases have been driven by global market conditions, rather than demand from U.S. home builders, so a slowdown in home building will do little to reduce prices.
?Where limited production capacity has created tight markets for wood panels, drywall, insulation, cement and brick, there are new facilities expected, but most won?t open until 2007 or 2008,? he said.
DRYWALL SHORTAGE
In the latest of ongoing NAHB monthly surveys of builders this May, 34 percent reported shortages of drywall, 5 percent of them severe, which is the highest percentage of reported shortages in fi ve years, Carliner said.
Demand for wallboard remains strong across most of the country, and the product is widely used in new home building, with about 10,000 square feet in an average home, he said. Continuing repair of hurricane-damaged homes in the Gulf Coast will add to demand, but the supply is expected to return to healthier levels in 2007 and 2008 when new plants begin operating.
WAITING FOR CEMENT
Builders who have been struggling with the short supply of cement in many parts of the country have most recently been outnumbered by those complaining about price increases, even though higher prices are not as difficult a problem. This month?s NAHB survey ?found fewer builders reporting concrete and cement shortages than in similar surveys during the past two years, but that could change as seasonal construction picks up.?
Although the producer price index shows national average prices of cement up by 14.9 percent for the twelve months ending in March, with the overall average for concrete products up about 10.5 percent, ?builders have reported much larger increases for specific products and specific areas, but the problem of availability is still generally more severe than increased cost,? Carliner said.
?Delayed supplies of poured concrete have halted construction projects, and there have been long waits for concrete products such as roof tiles.?
Since the cement shortage problem materialized in the spring of 2004, especially in places such as Florida that depend heavily on imports, surveys of cement producers by the Portland Cement Association have found shortages in the Southeast, as well as in the West, from Texas through the mountain states to the Pacifi c Northwest.
Regulatory barriers, primarily at the state and local levels, have been making it tough for the cement manufacturers to increase their capacity, although they have promised an additional 16 million metric tons by 2010. Only a small part of this new output will arrive before 2008, Carliner said, and in the meantime long-term rebuilding from Hurricane Katrina will mean that shortages are likely to continue for several more years.
This article was reprinted with permission from the National Association of Home Builders and its online weekly enewsletter, Nation?s Building News. Subscribe free at www. nahb.org.
