Coming off the heels of a 0.8% construction spending growth rate from September to October 2013, construction numbers continued their upward trajectory with a 1% improvement for November, taking total US construction spending to a seasonally adjusted $934.4 billion run rate. Both residential and non-residential construction spending grew from October’s figures.
Our friends at Gerdau Market Update regularly publish one of the more comprehensive non-residential and residential construction market indicators tracked by the steel industry. This month’s chart notes where non-residential construction momentum comes from – specifically warehouses, educational facilities, offices and banks. Manufacturing plant construction has also led the gains.
And though these gains remain positive, Gerdau Market Update notes that the 12-month non-residential square footage total of 921 million square feet remains well under pre-recession peaks of 1.9 billion square feet. Using Dodge data, Gerdau Market Update notes it might take until 2020 to reach those kinds of peaks based on current trends.
And what about the housing starts forecast?
MetalMiner’s favorite economic forecasters, ITR Economics, recently hosted a webinar in which they made a few comments regarding construction markets. The first, that the firm readjusted their economic forecast due to the housing market “surprise to the upside” during 2012 and 2013. But the economists warn that housing starts, though still in an upward cycle, have hit a declining rate of growth (in other words, housing has hit the top of its upside in the current economic cycle).
Moreover, ITR projects housing starts will reach their peak during the first half of 2014 and begin to decline during the second half. The firm indicated a mild decline. ITR, like Gerdau Market Update, sees strength in non-residential segments including private sector warehousing and logistics as well as office buildings and other commercial space.
What This Means For Metal Buyers
Despite a recent re-opening of an ArcelorMittal merchant bar plant in Tennessee, steel producers will likely maintain pricing power during the first half of 2014 for construction-related products, but a softer construction market during the second half may put price pressure on mills.
MetalMiner’s monthly construction index rose by 2 points from 89 to 91 with help from a strong US scrap market as well as firming semi-finished aluminum prices in Europe.
Main Price Drivers
US shredded scrap finished the month up 6.5 percent. European 1050 aluminum prices inched up 1.3 percent. The weekly US Rocky Mountain bar fuel surcharge rose a slight 1.2 percent over the past month. The weekly US Midwest bar fuel surcharge grew 0.4 percent. After a 0.3 percent increase, the weekly US Gulf Coast bar fuel surcharge rose as well.
Chinese rebar prices fell 3.5 percent after rising the previous month.
Prices for the Chinese low price of 62% Australian iron ore fines remained constant this past month. Chinese aluminum bar held pat, as did the price of Chinese H-beam steel.
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.