Construction Material Price Increases Impact New LBEs

An unusual and sharp increase in prices has been seen this year for cement, steel and wood, which are all major components in the construction of LBE facilities. The price increases could have a detrimental impact on the feasibility of many projects. LBEs that established their development budgets in 2003 may experience cost overruns.

Cement, a key ingredient in concrete, is seeing price increases as high as 20%. Even worse, there are cement shortages reported in some parts of the country, resulting in construction delays. The shortages are attributed to a continued building boom in housing in the U.S., a record level of commercial building in other parts of the world and a decrease in cement imports. Cement demand in the U.S. alone was up 9.5% during the first five months of 2004, compared to the same period in 2003. Rapid growth in China has tied up cargo ships and barges used to transport cement and has resulted in freight rate increases, making the import of cement more expensive. The U.S. imports 25% of its cement from overseas.

The composite price of framing lumber has recently been as high as $472 per thousand board-feet, up 52% from $311 a year ago. Steel prices are up as much as 30% to 50% from a year ago, depending on the type of steel and who you talk to. The increase in steel prices is attributed to strong demand in China, which is causing a worldwide shortage.