Construction Material Costs

Out of Control

Suppliers throughout Intermountain region concerned that prices for all kinds of construction materials will continue to rise, causing owners and developers to re-evaluate and scale back on project budgets.

By Brad Fullmer

Skyrocketing fuel prices severely impacting cost of materials

With the skyrocketing cost of fuel affecting virtually every type of business, suppliers of construction materials in the Intermountain region are scratching their heads trying to figure out a way to keep their companies profitable, and their clients satisfied.

Sherman Akers, owner of D&S Electrical of Pocatello and Idaho Falls, Idaho, has been selling electrical supplies to the construction industry for 50 years. He hasn’t seen costs of materials explode like this since the Vietnam War began in the late 1960s.

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“Just hang on to your hat,” says Akers, when asked how rising material costs are affecting his business and clients. “It’s unbelievable – there has been nothing like this in history. During the early part of the Vietnam War in late 60s, we had similar (exploding costs), but nothing of this magnitude.”

“It’s as scary as I’ve seen it in a long time,” says Doug Young, sales manager for Pacific Supply in Salt Lake City, a supplier of drywall, roofing and cultured stone products to the commercial and residential markets. “Between the softening dollar and hints of a national recession, the outlook is not good.”

“The cost of fuel is out of this world,” adds Scott Reynolds, president/owner of Alta View Concrete of Sandy, Utah. “We’re assessed a fuel charge on all our deliveries. It’s our hope that we break even on our fuel – it’s a hard one to track. It’s going to be a big factor in the construction economy.”

According to recent Data Digest information on construction material prices from Ken Simonson, chief economist for the Associated General Contractors (AGC) of America, national prices on a variety of materials have jumped anywhere from 10% to more than 40% in the past three months, with prices expected to continue to climb well into the summer and fall of this year.

Simonson wrote that from June 1 to August 1, costs of asphalt, aggregate, roofing products and metal wall panels were all expected to increase at least 10% in many parts of the country. Other examples of rising materials include steel guardrail (40% spike since February), rebar for concrete barrier (nearly 25% more since May 1), and vinyl chloride resin for PVC pipe, plastic pipe, vinyl siding and flooring (15% to 20%).

Simonson also reported that purchasing executives from manufacturing firms are expecting prices to continue to rise in coming months on items such as aluminum, copper wire, stainless steel and structural steel.

“It’s obviously a big concern to everyone in the construction industry,” says Rich Thorn, president/CEO of AGC of Utah, of rising material costs. “Unfortunately, the cost of fuel affects virtually every type of product or material, which explains why project costs have gone up so much in the past year or so.”

Akers says many of the major items he carries for electrical contractors, including raw steel, copper, and raw PVC pipe, have multiplied in cost by three or four times in the past six months. The days of manufacturers guaranteeing fixed costs are long gone, as are the days of deliveries sans fuel surcharges.

“You can get a quote today for copper wire that is based on the price of copper at the time of shipment,” says Akers. “The basic raw materials are costing more, as is the transportation. A container of raw materials used to cost $400 to ship from Chile to the U.S. Now, it’s $1,700.”

“Everybody has been impacted,” says Young, who recently had his company’s 10,000-gallon diesel fuel tank filled at a cost of $46,000, compared to $13,000 from five years ago. “For me, that’s a big check to sign off on. We’re paying 35% to 40% more for freight than just three years ago. It’s not just fuel. Steel has gone off the charts – 70% in the last year. And asphalt shingles manufacturers just bumped it up 42% in the past 90 days. Manufacturers are eliminating (price) quotes and forcing contractors to buy at a list (price), rather than at substantially less price quotes.”

“Steel has gone through the roof,” adds Pat Augustine, design department manager of Salt Lake City-based For-Shor, which sells concrete forming and shoring supplies, who estimated that items like wall ties and trench drain grates are up 15% to 20% since the first of the year. “I think the cost of steel will keep going up – maybe increasing another 80% over the next year or so.”

And it’s not just big companies who have to cope with rising material prices. Smaller businesses, like Intermountain Traffic Safety (ITS), a West Valley, Utah-based company that makes road and highway signs along with other traffic-related items, have had to expand the size of their inventories to offset higher shipping costs.

“Our freight costs have just gone crazy,” says Mike Knaras, owner of ITS. “What we’re having to do is order more product to justify the cost of bringing it in. On ADA tiles for example, we used to bring in maybe 150 at a time; now we bring in 300 to make it worthwhile. You just try to work smarter and figure out better ways of doing business. We end up carrying more inventory as a way to keep costs down.”

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