Factors Affecting Construction Costs

The construction industry is shifting before our eyes.

With Americans slowly returning to pre-pandemic behavior, the United States is on the verge of an economic resurgence. Infrastructure is high on the priority list. While this is encouraging for the construction industry, it also puts added pressure on costs and project completion due to the increased demand for materials and labor. 


Material and labor will continue to impact the rising cost of construction nationally for the remainder of 2021 and beyond. Here are some of the main factors contributing to increased costs:


Oil

Crude oil prices have risen by more than 80 percent since October 2020. Oil is critical to the construction industry. From manufacturing materials to transportation and job site equipment operation, oil plays an essential role in the success of construction projects. Oil prices could continue to increase throughout 2021 as we return to pre-pandemic behaviors. 


Steel

Nationally, steel prices are nearly 70 percent higher than the global market price, while China’s prices increased by more than 80 percent from the first quarter of 2020. However, it is still less expensive to import steel than to buy it domestically due to the steel tariffs imposed in 2018. Additionally, limited global supply and shipping challenges mean that imports are at low levels and impacting the domestic price of steel. 


Copper

Copper hit its highest price since 2011 in the first quarter of 2021. With a renewed focus on green energy and electric transportation technology, the demand for copper will increase in the coming years. For perspective, a conventional car uses 18 to 49 lbs of copper, while a plug-in electric car uses 183 lbs. The likely increase in demand will impact the price of copper going forward. 


Lumber

Lumber is the most utilized material in home and commercial construction projects. According to the U.S. Bureau of Labor Statistics, the cost of lumber increased nearly 90 percent from April 2020 to April 2021- reaching an all-time high. Causes for the price increase include increased residential construction during the pandemic and reduced global mill output.


Labor

According to a Bloomberg report, there are between 220,000 and 330,000 nationally- the same level as it was pre-pandemic. The lack of skilled construction labor is costing businesses. Due to high demand, contractors are paying a premium to have workers at their job sites. If contractors can’t find skilled laborers, it can delay projects which can be costly. 


Infrastructure Spending Plan

If President Biden’s $2 trillion American Jobs Plan is enacted, it will impact the demand for the above items. The Plan seeks to build and retrofit more than 2 million affordable and sustainable homes, improve the transportation infrastructure, modernize the country’s electrical grid, and build infrastructure for national high-speed broadband coverage. To meet the plan’s goals, demand for labor and material will increase, thus driving up costs. 


At The Window Depot, we install state-of-the-art, high-quality windows in homes throughout the Palm Harbor, Florida area. Our replacement will not only save you money over the long term, but it will also improve your home’s energy efficiency. Call us at (813) 901-5555 or fill out our contact form to schedule an appointment or learn more about our products and services. You can also visit our showroom in Palm Harbor to view our windows firsthand.




Sources


https://www.eia.gov/todayinenergy/detail.php?id=47056#:~:text=U.S.%20crude%20oil%20production%20averaged,U.S.%20Energy%20Information%20Administration's%20recordsduction%20averaged,U.S.%20Energy%20Information%20Administration's%20records  



 

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