Our Construction MMI continued to rise out of the trough it spent much of 2015 in last month, consolidating its March gains and even gaining 1.6% more.
The cautious optimism we’ve been seeing for the last few months is showing signs that it might turn into something more. The Census Bureau reported that construction spending increased 0.5% between January and February and was up 10.3% year-over-year.
Healthy Increases Over 2015
Non-residential construction declined 1.4%, but was up 10.1% from last year’s level. The agency said eight of the 16 non-residential sectors saw an increase in February. Overall, construction spending actually slipped .5% from January to February, but the entire year was still positive compared to last year.
It’s not just the U.S. market, either. The world’s largest consumer of construction materials, China, is finally seeing some returns from stimulus efforts. The central government there loosened policies, prompting a home sales rebound in 2015 and the looser lending standards are leading to more home buying and even some commercial construction gains.
Chinese Housing Stimulus
China’s smaller cities are not seeing the rebound that the larger metropolises are and there is concern that a dangerous property bubble is forming in the larger cities such as Beijing, Shanghai, Shenzhen and Guangzhou, which have recorded sharp gains in housing prices since the Lunar New Year holiday in February. Still, the purpose of stimulus is to stimulate and China seems to have finally found a way to increase construction and buying.
Back, here in the U.S., steel mills are cautiously (there’s that word again) raising prices of rebar and other construction materials as we enter the traditional building season in the Midwest and Northeast. All of the macro factors are there to sustain the recent price increases we’ve seen in construction materials — a weakening U.S. dollar, a general commodities rally led by oil and strengthening demand in large markets — but we continue to advise buyers to be prudent and pay attention to the market before committing to large volumes. Nothing has stuck just yet.
Actual Construction Materials Prices
Chinese rebar increased a whopping 21.3% to $372.13 a metric ton from $306.72 per mt in March. Chinese H-beams increased to $356.63 a metric ton from $302.14 per mt in March, an 18% price hike. U.S. Shredded steel scrap increased to $204 a short ton from $188 per st in March, an increase of 8.5%.