Steel tariffs are affecting the construction industry. The cost of goods used in construction jumped in April at the fastest year-over-year rate since 2011, with ongoing increases continuing for a range of building materials, including many that are subject to proposed tariffs that could drive prices still higher and cause scarcities, according to an analysis by the Associated General Contractors of America.

AGCA’s statement was based on its analysis of U.S. Department of Labor data released May 9. Association officials said that the new data indicates many firms already are being squeezed by higher materials prices that they are unable to pass along to their customers.

“Contractors have started to boost the prices they charge, but they are falling further behind on the cost of materials they buy,” said Ken Simonson, chief economist at the Associated General Contractors of America.

Expect price increases in drainage pipe, municipal castings, aluminum structures, and process equipment.

Rising prices a factor in all projects, all planning

“This imbalance poses two risks—either contractors will suffer decreased profit margins or project owners with fixed budgets will cut back on the projects they undertake.”

Steel tariffs and aluminum tariffs are affecting construction costs from the ground, … up. 

The producer price index for the construction industry rose 1.0 percent in April, and 6.4 percent over the 12 month period (April 2017 – April 2018). This year-over-year increase was the steepest since 2011.

Meanwhile, the producer price index for nonresidential construction—a measure of what contractors say they would charge to put up a mix of school, office, warehouse, industrial and health care buildings rose 4.2 percent year-over-year.

This gap between the 6.4 percent rise in the cost of construction goods and the 4.2 percent increase in prices charged is telling. Unfortunately, the gap may widen further if tariffs or quotas push up costs further for the many steel and aluminum products used in construction.

steel tariffs and steel pipe price increase tariffs 2018

As a Contractor, What Can you Do Now? 

“The best thing you can do at this stage is get orders in early rather than late,” says QSM’s Josh Loeske. “If you plan to issue purchase orders on a project, get those out to us at the earliest possible date so we can talk with you about pricing and availability.”

From April 2017 to April 2018, the price of aluminum jumped by 11.9 percent, prices on steel rose 7.4 percent, and items such as lumber and plywood rose 11 percent.

The U.S. has imposed tariffs on several types of steel and has announced or recently imposed additional tariffs — Note: the latest tariffs are not reflected in the April price index.

Other construction inputs that rose sharply in price from April 2017 to April 2018 include diesel fuel, 41.6 percent; copper and brass mill shapes, 10.5 percent; gypsum products, 7.5 percent; ready-mix concrete, 6.9 percent; and truck transportation of freight, 6.0 percent.

Association officials say the Trump Administration’s tariffs pose a real threat to the continued growth of the construction industry. As steel, aluminum and wood prices continue to surge, contractors will be forced to charge more, potentially discouraging or delaying new infrastructure and development projects.

“The new tariffs have the potential to undermine many of the benefits of the president’s recently enacted tax and regulatory reforms,” said Stephen Sandherr, CEO of the Associated General Contractors. “Instead of investing their tax savings in new personnel and equipment, many firms are being forced to use them to cover increasing steel and aluminum costs.”

Stay tuned with QSM for updates on tariffs, and current plus local market conditions.