Contractors struggle to pass on rising petroleum, metal costs

AGC of America
May 12, 2011
COMMERCIAL, RETAIL, FABRICATION : BUSINESS

Contractors were only able to partially pass on the costs of rising petroleum and metals prices in April, according to an analysis of producer price index figures released May 12 by the Associated General Contractors of America. Association officials said the resulting cost squeeze—a result of sluggish demand for construction—will push more construction employees and firms out of work unless public officials act promptly to encourage public and private investment, according to a same-day press release.

"Contractors have been clobbered for several months by double-digit price hikes for diesel fuel, copper and steel products," said Ken Simonson, the association's chief economist, in the release. 

Simonson said the most extreme price increase was for diesel fuel, which jumped 5.7 percent in April and 41.6 percent year-over-year. Noting that prices for crude oil, iron and steel scrap, and copper futures—items that usually indicate near-term price movements for diesel fuel, construction steel, and copper wire and pipe—have slipped from their highs in recent weeks but remain very volatile, Simonson suggested the worst may be over for now. Meanwhile, construction employment has risen modestly for the past three months and construction spending edged up in March according to government reports last week. However, the construction economist cautioned that many contractors, especially those working on public projects, are still facing cutbacks in work to bid on, according to the release.

Read the full AGC release...