Gilbane, Inc., recently released its Spring “Building for the Future” construction economics report and predicted that even if new starts growth were to turn flat for rest of 2015 (which is not expected), starts already recorded over the past 12 months indicate spending for nonresidential buildings in 2015 will increase 15% over 2014, the best growth since 2007.
Nonresidential new starts have been increasing at an average of 16% per year since a post-recession low was reached in 2012.
The Gilbane report states that nonresidential building starts from April 2014 through February 2015 reached the best three-month average and best six-month average since July 2008 this month.
The construction industry is, by far, the largest consumer of steel products worldwide. Approximately 100 million tons of steel is produced annually in the US. More than 40 million tons of that is delivered to the construction industry. The next largest industries combined (automotive, equipment and machinery) do not consume as much steel as construction.
Structural steel is the most used structural framing material in the US, with a 58% of market share for nonresidential and multistory residential buildings, based on square footage built. The next closest framing material, concrete, holds only 21% market share.
Gilbane quotes a Gerdau report of year-to-date steel mill capacity utilization currently is at 67.7% (as of April 4, 2015). Capacity utilization a year ago was at 77.1%.
On the year-to-date, US mills have operated at an average utilization rate of 72.9%. This leaves considerable room for capacity expansion and this will tend to hold down prices.
Copper, Aluminum and Sheet Metal
The PPI continues to track copper, sheet metal, and aluminum’s falling prices. Gilbane notes that, roughly speaking, copper material is about:
- 10% electrical contract or 1% of cost of a construction project.
- 5% of an HVAC contract or 0.6% of the cost of a project.
- 10% of a plumbing contract or 0.3% of the cost of project.