Record Steel Mill Product Price Increases Add to Lumber Woes, Push Building Materials Higher

By David Logan on March 12, 2021 • (0)

Prices paid for goods used in residential construction ex-energy rose 1.4% in February (not seasonally adjusted) and have increased 7.7% over the past 12 months, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. Building materials (i.e., inputs to residential construction less food and energy) prices have declined just twice since December 2019.

The index for inputs to residential construction, including food and energy, also increased over the month (+1.9%) as energy prices climbed 6.0%.

Steel mill products prices increased by 11.8% in February to a level not seen since the months following the imposition of tariffs on steel in 2018. The month-over-month percentage increase set a record high, surpassing the prior record of 9.6% set in 2008.

Over the past three months, prices have climbed 22.0%. Perhaps more concerning than rising prices is that the pace of increases has quickened each of the past seven months.

Prices paid for softwood lumber (seasonally adjusted) rose 5.3%, surpassing the September 2020 level to reach a new record high. Lumber prices have remained extremely volatile since the 88.5% increase between April and September 2020. Since falling 22.9% between September and November, the softwood lumber PPI has risen 35.5%. The lumber PPI is now 4.5% higher than the record high set in September.

In addition to nominal price movements and tariffs on Canadian lumber, cross-border purchasers are affected by the strength of the U.S. dollar relative to the Canadian dollar. Not only has the USD weakened 12.9% since March, it has fallen 3.8% since lumber prices began rising again in November.

Prices paid for gypsum products declined 1.3% in January, more than offsetting the 1.2% increase seen in January. The PPI for all gypsum products has increased 6.3% over the past 12 months.

Prices paid for ready-mix concrete (RMC) increased 0.3% (seasonally adjusted), following a 0.2% decrease in January. Unlike softwood lumber prices, those of RMC have stabilized in the first two months of 2021 after exhibiting above-average volatility in the latter half of 2020.