Aluminum prices have jumped 47% this year
The three-month offer price for aluminum traded on the London Metal Exchange has risen 47% this year to $2,907 a tonne. Prices are up 73 per cent from pre-pandemic levels.
“Aluminum is an integral part of residential construction and is used to build everything from siding and gutters to insulation, nails and HVAC equipment,” said Jerry Howard, CEO of the National Association of Home Builders. Aluminum is also used in 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 by 15-25% over that period,” he said.
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The high cost of aluminum isn’t the only headache for home builders.
Earlier this year lumber prices had climbed 316% since the start of 2020, adding $36,000 to the cost of building an average-sized new home.
Prices of other essential commodities including iron, copper, steel and natural gas have also seen a jump.
But it’s not just the cost of materials that is rising.
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Builders and contractors are also dealing with higher transportation and labor costs. In addition, there are not enough roofers, glaziers, plumbers, electricians and other types of workers to meet the needs of the construction industry.
“It’s all moving in the same direction, driving up project prices,” said Anirban Basu, chief economist at Associated Builders and Contractors. “Some project owners are saying, ‘No more for me, I’m done. I’m not going to go through with the project right now.’”
One Affiliated Builders and Contractors Its construction backlog indicator fell to 7.7 months in August, down 0.8 months from July, said the report released on Tuesday. The reading was 0.3 months below its year-ago level.
The decline in confidence reflects the decline in homebuilder sentiment that was reported last month. The National Association of Homebuilders/Wells Fargo housing market index fell 5 points to 75 in August, its lowest since July 2020.
Still, ABC’s Construction Confidence Index showed readings for sales, profit margins and staffing levels all above 50, indicating growth expectations over the next six months.
“The cure for high prices is high prices,” Basu said.
“These higher prices for aluminium, copper, steel and other inputs of production prompt firms to increase short-term supply,” he said. “So it should be the case that at some point in 2022 we see some relief for the construction industry and other goods-producing sectors of the economy.“