Image courtesy PEG and S&P Global Market Intelligence
Engineering and construction costs increased again in April, according to the Engineering and Construction Cost Indicator from PEG and S&P Global Market Intelligence. The headline Engineering and Construction Cost Indicator, a leading indicator measuring wage and material inflation for the engineering, procurement and construction sector decreased 2.7 points to 61.9 in April; April’s reading is still above the break-even 50 mark, indicating prices continue to rise, though increases were slightly less widespread than during March. The sub-indicator for materials and equipment costs edged down 3.2 points to 62, and the sub-indicator for subcontractor labor costs decreased to 61.7 from 63.2 in March.
The equipment and materials indicator continued to show rising prices in April. Three of the 12 components increased compared to March with an additional three remaining flat. Carbon steel pipe was unchanged and continues to remain in contractionary territory with a reading of 45, while pumps and compressors saw a minor decline to join shell and tube heat exchangers in neutral territory. Most of the other categories saw declines compared to March. Transformers and electrical equipment each saw 6.8-point decreases, settling at 75, while both ocean freight categories saw double digit declines after two months of extremely high readings. The largest increase was seen for fabricated structural steel, which saw an 18.6-point increase from contractionary territory up to a reading of 63.6.
Christos Rigoutsos, senior economist at S&P Global Market Intelligence, says, “The outlook for construction steel has seen significant activity to start the year; prices rose in the first quarter given higher scrap costs but have remained stable ever since. Construction steel is currently overpriced, and we expect prices to slowly weaken. The construction outlook in the U.S. is buoyed by the Infrastructure Investment and Jobs Act projects that require the use of steel that has been melted, poured, and rolled domestically. However, after 2024, demand is expected to wane, and prices will find a floor between $1,000 to $1,100/metric ton.”
