Recent commentary in the Federal Reserve's Beige Book criticizes new tariffs on imports of steel and aluminum, blaming the tariffs for the recent changes in steel prices. Using anecdotes from the market, the Book mentions that late March and early April saw drastic rises in steel prices from a number of sources. But are the tariffs truly to blame for the rising price of steel? Like many market forces, it's not a simple matter of a single aspect determining price in this case. Here's a quick look at several other factors that do a better job of explaining the price hikes: a strong rise in construction.

A Fox News report that covered the changes in steel prices focused solely on the tariffs, which placed a 25% increase on imported steel and a 10% increase on imported aluminum. But as we all know, with constant cries of "false news" springing up everywhere, the news is not necessarily entirely impartial anymore. The same report also commented that drywall, concrete and lumber have also risen sharply, most of which is produced within the US and is not subject to tariffs. Also, the price of aluminum is actually down instead of up, which you wouldn't expect to be the case if the tariffs were the entire problem.

So what are some of the other forces at work now? Some developers and larger construction firms decided to purchase steel prior to the tariff going into effect. Some were pre-purchasing commonly used materials or those that would be needed for upcoming projects. Others chose to make private investments into steel commodities. Both actions have driven up steel prices, probably well above what the prices would have hit from the tariff going into effect on its own.

Construction is growing again. Continuing growth in the real estate and commercial markets has fueled a similar growth in construction. Current numbers estimate lowering unemployment in construction in 37 states, down a full percentage point from the same time last year. In fact, a recent Area Development article noted that 65% of contractors are having a hard time finding skilled workers for their projects. Their current figures determine that there are six applicants for every job available, while the numbers last year were nearly double that. When you take into consideration that many of those applicants are not trained, knowledgeable or skilled, it makes the process of finding skilled labor even harder.

In terms of the industry at large, HousingWire magazine recently reported that the fourth quarter of 2017 has seen the most construction growth since early 2016, and that during one of the slowest times of the year for construction projects. The growth late last year was 8.5%, more than making up for the 1.2% decrease in the prior quarter.

Whichever side of politics you're on, if you're in construction, the recent material hikes mean better times ahead. One of the best ways to take advantage of the current construction upswing is to keep your crew active on the job site. How do you do that when you need materials from a supplier you know you can count on? That is where Wallboard Supply Company steps in for you. We are a reliable supplier you know you can count on tariffs or no. Please feel free to contact our experienced associates today to get a quote or arrange a delivery up to 110 feet above ground level.

 

Source:
https://www.housingwire.com/articles/43152-construction-sees-most-growth-since-first-quarter-of-2016