Latest Construction Spending Data Reflect Iron Ore, Rebar Price Rises on Monthly Index

As new housing construction finally shows some glimmers of health, China steel prices and iron ore prices primarily drove the monthly Construction MMI® to a value of 92 in October, an increase of 4.5 percent from 88 in September.

MetalMiner’s construction metals index bumped up four points over the last month primarily due to rising rebar and H-beam prices in China. China rebar had fallen three months in a row, but rose over September, while China H-beam prices saw a four-month declining price trend that broke this past month.

European aluminum commercial sheet as well as iron ore prices in China – 62% Australian fines spiked 13 percent – also lent support to this month’s construction index.

Source: MetalMiner IndX℠

Though the ISM reported surprisingly strong US manufacturing numbers, US construction spending fell slightly in August (Ed. note: US government construction spending releases lag the monthly MetalMiner Construction MMI® by approximately 30 days.)

“We note, however, that it appears as though residential housing has finally begun to climb out of its trough based upon the most recent numbers from the S&P/Case-Shiller Home Price Index,” said Lisa Reisman, managing editor of MetalMiner. “Anecdotally, many manufacturers that serve the housing market have also suggested the same to us.”

The outlook for US construction remains positive, according to the latest Reed Construction Data commentary:

“Our forecast is that housing will continue to contribute to the economy for the remainder of this year and throughout next year and beyond. Improvement in residential construction helps lift the rest of the economy and is both a direct and indirect positive for nonresidential construction.

This month we extend the forecast horizon out to 2014. The Reed Construction Data forecast, which assumes no recession, is for total construction spending to increase 8.1% in 2012, 7.9% in 2013, and 9.6% in 2014.”

“This bodes well for the Construction MMI® going forward,” Reisman said, “and as we will see over the course of the next few days when we release additional monthly metal index data, many of the metals that support that industry have seen a lift.”

Drivers of the Construction Metals Index Rise

After dropping the previous month, the Chinese low price of 62% Australian iron ore fines prices rose 13 percent. The price of Chinese rebar rose 8 percent after falling the previous month. The price of Chinese H-beam steel prices rose 5.5 percent.

The price of European 1050 aluminum rose 6.3 percent over the past month after holding steady the previous month.

US shredded scrap prices were down 6.7 percent for the month.

The weekly US Gulf Coast bar fuel surcharge grew 0.6 percent, while the weekly US Midwest bar fuel surcharge was down 1.3 percent.

Chinese aluminum bar rose 1.1 percent for the month.

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The Construction MMI® collects and weights 9 metal price points used within the construction industry to provide a unique view into construction industry price trends over a 30-day period. For more information on the Construction MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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