Increase in steel prices drives up cost of building, but wood costs fall in ‘06

Published 9:00 pm Sunday, August 27, 2006

Those who buy steel, concrete and a host of other construction materials to build new houses, commercial buildings and even schools are trying to stretch budgets as prices keep rising.

While Leonard Berman of Everett Steel calls the recent rebound in steel prices healthy for that sector, it’s not been welcomed by contractors, who have seen double-digit increases for a range of materials.

“In the old days, all you had to worry about was the price of lumber,” said Dale Woodard, owner of Everett-based Olympic General Contractors.

Actually, lumber and plywood prices generally are down from a year ago. That’s kept the cost of building new single-family homes from rising as fast as the cost of new commercial construction.

Since July 2005, the overall Producer Price Index, a measure of inflation, has gone up 4.2 percent. The index for construction materials has risen nearly twice as high, 8.3 percent, since a year ago, according to the U.S. Bureau of Labor Statistics.

The reasons vary with the material. For example, strong construction activity overseas, especially in China, has propelled steel prices back to levels not seen in years.

Booming demand in China and India, as well as supply disruptions, also have dramatically pushed up the value of copper, used in components such as plumbing pipes, electric wiring and brass. A recent labor strike at the world’s largest copper mine in Chile further inflated prices for that metal.

The ripple of higher crude oil costs also has hit the construction industry. Not only is it more expensive to transport materials, but anything made with petroleum – such as asphalt and PVC pipes – also has gone up.

For those who build for a living, it’s mostly a matter of dealing with the costs, one way or another.

“You try to hedge a little bit,” Woodard said, adding that on a recent project, his company searched far and wide for the best prices on steel. The company ended up buying it out of state and shipping it here.

He said electric and plumbing contractors on recent projects also have bought their materials as soon as possible to protect against further price increases.

Bob Dobler, managing partner at Gamut360 Holdings, an Everett-based commercial development firm, said he hasn’t put off any projects due to the volatile construction costs. But he knows a few who have.

The increases are especially hurting school districts trying to build new facilities. New schools in Everett and Lake Stevens are millions of dollars over budget, while the Snohomish School District has trimmed features from its new high school to keep costs from spiraling. The Granite Falls School District ordered the structural steel itself in an attempt to put a lid on the cost of building its new $41 million high school.

For public works projects, there’s always tomorrow. With the cost of asphalt about 23 percent higher than last year, the Snohomish County Public Works division plans to pave fewer miles of roads than average this summer.

Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.