Construction materials prices rising fastest in civil engineering

The sharp increases in construction materials prices observed in recent months coupled with uncertainty as to how prices might behave in the coming quarters have considerably raised the level of risk for general contractors and investors. Predicting and estimating project costs has become difficult, especially in the case of complex projects that take a long time to complete. The need for well-calibrated forecasts has greatly increased.

A new report from PMR, Forecasts for prices of main building materials, Q3-Q4 2021, analyses the movement of prices since 2019 and forecasts their evolution in the rest of 2021. It contains forecasts for 16 categories of building materials, and presents composite cost indices for materials used in civil engineering construction and in building construction.

Civil engineering materials prices up 22.5% in Q2

Our analysis shows that the materials cost of civil engineering projects has been rising considerably faster than that of building construction projects, due chiefly to soaring prices of asphalt and reinforced steel:

• – In Q2 2021, the prices of key materials used to construct buildings grew by 12.5%, year on year, whereas the prices of materials used in civil engineering projects jumped by as much as 22.5%;
• – Since the start of 2019, the prices of materials used to construct buildings have risen by around 16%, and civil engineering materials by 18.5%.

Further price increases projected

Our report presents three scenarios for how the price situation could unfold, reflecting different forecasts for macroeconomic and other relevant variables that affect the prices of building materials, including the situation on the supply side and the demand side of the market.

The baseline scenario is what PMR believes to be the most likely price scenario. There is also a high-price scenario and a low-price scenario.

We forecast that in the second half of 2021, the prices of building materials used in civil engineering construction will continue to rise by more than 20%, year on year, driven by strong increases in the prices of reinforced steel and asphalt. Under our baseline scenario, by the end of 2021 the price index of materials used in civil engineering construction will surpass 120, whereas the index for building construction will reach just over 117.

For more information, detailed forecasts and the underlying assumptions you are referred to the full PMR report, Forecasts for prices of main building materials, Q3-Q4 2021.