Materials price volatility to stretch through summer

June 29, 2016 - Construction costs fell once again in June, according to IHS Inc., a Lexington, Massachusetts-based consultancy, and the Procurement Executives Group (PEG). 

The headline current IHS PEG Engineering and Construction Cost Index registered 48.1 during June, down from 49.3 in May. The headline index has been consistently below the neutral mark for the past 18 months.

The current materials/equipment price sub-index, at 48.4 in June, shows costs are once again falling, which has been the general trend since January 2015. Although fabricated structural steel and copper-based wire and cable are still showing price increases, seven other components in the materials and equipment index show falling prices. 

“Commodity prices saw widespread strength earlier this year that has not been supported by improving fundamentals,” said John Mothersole, director of research at IHS Pricing and Purchasing. “IHS expects price movements to remain choppy for much of the summer before a slow improvement in conditions brings some stability back to markets later this year.”

The six-month headline expectations index shows lower future prices. This index moved down from 50.7 in May to 49.4 in June. The consensus for higher price expectations took a hit in June.

In the survey comments, respondents continue to highlight low-level activity in capital expenditure projects, especially in the oil and gas sector. MM