Construction MMI Hits a New Low With No Demand Recovery in China

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The Construction MMI fell 2.7% as a broad swath of construction products saw further price declines last month.

Free Sample Report: Our Annual Metal Buying Outlook

As with other indexes, the year-long collapse in steel prices is responsible for some of the losses in construction this month but that doesn’t really scratch the surface. None of the component metals of the index increased this month, with the exception of one surcharge. The non-ferrous construction metals are in the same boat as steel construction inputs such as rebar and scrap steel.

Construction_Chart_December_2015_FNL

We hate to continue to point the finger in only one direction, but what’s driving the fall in commodities prices is the slowing Chinese economy and its subsequent pull-back in construction demand.

The Chinese steel sector has at least 200 million metric tons of unused annual capacity and, according to Reuters, its outbound shipments of steel have jumped 27.2% in the year to September from the same period last year.

All Commodities in Freefall

It’s a similar story for Chinese aluminum. We continue to chart new all-time lows for the construction MMI as the demand that many have grown accustomed to depending on from China is simply not there anymore. There’s a good chance it might not come back for some time.

Free Download: Compare Price With The November MMI Report

That’s why, from a price standpoint, it largely does not matter that the US nonresidential construction market is now in full expansion mode. I have anecdotally observed more process efficiencies in US construction that are making materials prices less of a concern to general contractors and building owners.

We caution buyers to keep their purchases conservative as many analysts thought the market would reach a bottom by and, as this month’s drop clearly indicates. Construction materials prices could have much further to fall.

Actual Construction Product Prices

Chinese rebar fell from $322.89 a metric ton to $290.74, a steep drop of 9.95%. Chinese H-beam steel fell from $333.97 per mt to $309.50 per met, a slide of 7.3%. Aluminum 1050 sheet dropped from $2,624.76 per mt in November to $2,557.92 per mt this month, a fall of 2.5%.

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