Building-material prices that skyrocketed earlier this year mostly have remained at high levels, and in some cases have risen further, causing continued concern in the construction industry here.
Contractors say some building plans are being sent back to the drawing board for redesign so theyll meet budget, while others are moving forwardat either a higher cost to the project owner or tighter margins for the builder.
Though the higher prices have been around long enough now that many construction bids accommodate them adequately, some builders and building fabricators still are suffering the negative effects of an overlap period, says Dan Weaver, purchasing manager and part-owner of West Plains-based Metals Fabrication Co.
That overlap occurs when the price of materials rises between the time a contractor makes a bid on a project and when materials are purchased and the project starts.
It has cost us a lot of money, Weaver says. I havent seen anything like it in the last 20 years.
The most volatile of the building-materials prices has been in the steel market, though builders also report price increases in other common materials, such as drywall and insulation.
The price trends have been mixed in the wood-products market. Prices for framing lumber are higher than they were earlier this year and are well above last years prices. Structural panels, however, have dropped in price substantially in recent weeks, though theyre still more expensive than they were a year ago.
T. Ray Looper, general manager of Haskins Steel Co., of Spokane, says the longtime steel distributor typically is paying just under 40 cents a pound for hot-rolled plate steel these days, up somewhat from the 34 cents a pound it paid earlier this year and double the 19 cents a pound it was paying for the same product last fall.
In addition to being hit with higher raw materials prices, steel distributors also have had to pay surcharges to offset mills costs for raw materialsscrap steel and cokeand for fuel, which has had a well-documented price hike of its own in recent months.
Looper says steel mills have eased off on the surcharges somewhat, but have maintained their increased prices, so the net cost is about the same.
Total costs, including prices and surcharges, havent gone up for a few weeks, and Looper says that is what were groping for to call a good sign.
C. William Savitz, president of Garco Building Systems, says the increasing prices have crimped the West Plains steel-building fabricators profit margins, but have had no effect on its activity levels. Rather, he says, job orders reached record levels this spring.
The materials-price increases really put a squeeze on us, but the volume is making up for the shortfall in margins, Savitz says. The business keeps coming despite pricing.
Before this spring, Garcos most active quarter was the second quarter of 1997, when it landed $6.6 million in sales. In the first quarter of this year, however, it shattered that record with $12.1 million in sales.
The company is projecting about $24 million in sales this year, Savitz says, up substantially from $15 million last year.
Garco Building Systems still has to work to find some steel materials at times, but Savitz says the supply is better than it was earlier this year.
In the wood-products market, framing-lumber prices averaged $419 per thousand board feet in the week ended June 18, up from $389 in late February and $309 a year ago, according to Random Lengths, a Eugene, Ore.-based industry journal that publishes composite prices for wood products. The publications composite price for structural panels, such as plywood and oriented-strand board, was $437 per thousand square feet, down from $545 in late February, but well above $327 a year ago.
A recent Random Lengths report says that in recent weeks, The price structure in OSB was in disarray, but a strong downward trend was clear. Southern Pine plywood buyers took their cues from the crashing OSB market and pulled back.
While those prices are coming down, construction-industry managers and those who are planning large projects are monitoring materials costs closely.
Tim Stulc, a project manager at Vandervert Construction Inc., of Spokane, says the big contracting company has had to pay moderately higher prices in recent months for lumber, drywall, and insulation, with structural steel and sheet metal prices going up more sharply.
Were watching trends weekly, he says. We havent seen any negative effects on projects that are under way or being considered at this point.
Spokane School District No. 81, which had a $165.3 million bond issue for a number of building projects planned over the next six years, also is watching building-material prices closely.
The first group of projects funded through that bond involves replacing roofs and heating, ventilation, and air-conditioning systems at three elementary schools. Garco Construction Inc., a general contractor here owned and operated separately from Garco Building Systems, was awarded all three jobs for a total of $6.8 million.
Greg Brown, director of capital projects for District 81, says the bids came in about $1 million higher than the district expected, but building-materials costs werent the reason. The district required the projects to be completed faster than initially planned, and the additional cost mostly involved higher labor expenses than initially expected.
The contractor on those projects did run into one materials-related emergency when its initial steel supplier backed out and said it couldnt deliver for the project, Brown says. The contractor resolved the problem with the supplier and was able to move forward, but Garco was scrambling for a while, he says.
Mark Anderson, the districts associate superintendent, says that while the district will watch building material prices, it expects to be able to cover cost overruns despite price hikes.
The districts bonds were sold at a lower interest rate than originally projected, so it will have more money for projects than originally expected.
Well be able to build what we said wed build, Brown says.
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