Latest news with #ConstructionMMI
Yahoo
19-07-2025
- Business
- Yahoo
Tariffs and Interest Rates Squeeze Construction Budgets
The Construction MMI (Monthly Metals Index) traded flat month-over-month, with no noteworthy price movement in either direction. Meanwhile, the U.S. construction industry is bracing for fallout from a new round of tariffs on key building materials. Industry groups warn that these tariffs, alongside persistently high interest rates, threaten to squeeze project budgets. Surging Costs for Steel, Aluminum and Other Metals As metal prices remain somewhat volatile, contractors nationwide report mounting cost pressures. Now that President Trump has announced more duties, including a 50% tariff on all copper imports, further cost spikes appear imminent. Ken Simonson, chief economist of the Associated General Contractors of America (AGC), cautioned, 'It is likely that contractors will be hit with substantial additional price increases shortly, unless the tariffs are postponed or rolled back.' Such material inflation could strain profit margins across the construction industry. Many U.S. builders operate on thin margins (often <5%), so a jump of 5–7% in overall project costs can damage profitability. Industry estimates forecast that the 2025 tariffs could drive steel prices up by ~8.2% and aluminum by ~5.7%. As a result, total construction costs would rise 5–7%. Recent Producer Price Index data confirmed that essential products like structural steel beams, rebar and aluminum components are all more expensive. In fact, prices for aluminum mill shapes were nearly 10% higher this January than a year prior, while copper/brass mill forms surged over 12% year-on-year. Tariffs and Interest Rates Not only are material costs facing potential price spikes, but builders are also contending with a challenging financing environment. The Federal Reserve's 2022–2023 interest rate hikes took benchmark rates from near-zero to over 5%, the highest in decades. Although the Fed eased slightly with a few rate cuts in late 2024, bringing its key rate to about 4.25–4.50%, borrowing costs remain elevated. This means that commercial construction loans and mortgages are carrying 6–7% interest rates, roughly double the lows seen a few years ago. These higher rates have made it pricier for developers to finance new projects, adding another layer of cost on top of expensive materials. The Construction Industry Could See Good News Soon Fortunately, there is hope on the horizon. Cooling inflation earlier this spring prompted optimism that the Fed might cut rates later in 2025, potentially spurring construction activity. 'Due to a cooler-than-expected inflation reading in May, the chances of an interest rate cut by the Federal Reserve in 2025 have improved,' noted Anirban Basu, chief economist of Associated Builders and Contractors. Lower interest rates would reduce financing costs and could help offset the impacts of tariffs by boosting construction industry project demand. However, the latest data complicates that outlook. Inflation ticked up to 2.7% in June (a four-month high) as consumer prices began to reflect the new tariffs. Analysts warn that full tariff pass-through hasn't even hit yet, meaning inflation could rise further in the coming months. If tariffs keep price levels elevated, the Fed may delay rate cuts to avoid fueling more inflation, leaving builders stuck with high borrowing costs for longer. For procurement executives navigating these cross-currents, knowledge is power. MetalMiner's weekly newsletter provides timely market insights on metal price drivers and macroeconomic news, enabling teams to adjust their sourcing strategies in real-time. Sign up here. In the coming months, construction industry executives will be keeping a close eye on Washington and the Federal Reserve. For now, tariff policies remain fluid. For instance, a proposed extra 25% tariff on copper and lumber has been floated, but not yet enacted. Any such move could further jolt material markets and hit home builders (many of whom rely on Canadian lumber and Mexican gypsum) especially hard. On the monetary front, the consensus is that the Fed will hold rates steady for now. If inflation stabilizes later this year, a gentle rate cut or two is possible by late 2025. But until there's clarity, caution will rule. 'Our view is that continued investment into construction will remain cautious, for now,' said Michael O'Reilly of construction consultancy RLB. He went on to note that uncertainty around tariffs and policy changes is keeping developers in 'wait-and-see mode.' Ultimately, the combination of tariff-driven cost inflation and high interest rates is creating a careful balancing act for U.S. construction firms. As a result, industry leaders are focusing on cost control, strategic sourcing and contractual protections to weather the storm. Many are also leveraging data and forecasts to make smarter buying decisions. For example, some MetalMiner subscribers use customized price forecasting on MetalMiner Select to time their metal purchases and negotiate better with suppliers. By blending such tactics with prudent project planning, construction companies can strive to preserve their margins and keep projects on track. By Metal Miner More Top Reads From this article on
Yahoo
17-04-2025
- Business
- Yahoo
Construction Firms Brace for Increased Costs
Via Metal Miner The Construction MMI (Monthly Metals Index) broke out of its over 6-month-long sideways trend to pivot down 5.41%. This new movement outside of its sideways range could indicate more volatility in the short term than the index experienced in the past 12 months. The new Trump tariffs on China caused some volatility in the price of construction materials, including H-beam steel and steel rebar. If the U.S. and China fail to negotiate these new policies, the index will likely remain unpredictable for the short term.. The U.S. construction and manufacturing sectors are bracing for impact as President Trump's 2025 10% blanket tariffs take shape. Trump has declared a 10% levy on all foreign goods entering the United States, a sweeping tariff policy aimed at bolstering domestic industry which was recently covered in MetalMiner's weekly newsletter. That figure excludes Canada and Mexico, which already incurred 25% tariffs earlier this year. However, as of April 9, the White House announced that the 10% tariffs are on hold for 90 days, except for those levied against China. This trade move could dramatically reshape the flow of construction metals like steel, aluminum and copper into the U.S. market. Trump's 10% blanket levy marks a sharp departure from the targeted tariffs of the past. Trump has defended the sweeping tariffs as necessary to address large trade deficits and nonreciprocal trade practices he says have hollowed out U.S. manufacturing. 'They give us great power to negotiate,' the president stated, suggesting the tariffs could be a lever for further mediation. China has been hit especially hard by the Trump tariffs. Imports from China, including construction metals like H-beam steel and steel rebar, faced a punitive 54% duty as of early April. Despite the broad reach, the duties do not treat all products equally, and the administration has carved out some notable exemptions. According to a White House fact sheet, the Trump tariffs currently exempt certain critical goods and prior tariff regimes from the new 10% levy. For example, steel, aluminum, automobiles and automobile parts remain governed by existing Section 232 tariffs and won't incur the additional 10% charge, a move that MetalMiner's free comprehensive tariff guide offers revenue saving strategies on. Along with this, Trump has separately raised the Section 232 tariff on aluminum from 10% to 25%, matching the 25% rate on foreign steel while ending country exemptions under that program. For the U.S. construction industry, metals like steel and aluminum are in the crosshairs of the new trade barriers. Even though steel and primary aluminum fall under pre-existing tariffs, Trump's latest actions expand and reinforce those duties while including new duties on other construction materials separate from metals. As of March 12, the administration eliminated all country exemptions for steel and aluminum tariffs. The new 10% blanket tariff further complicates the picture for construction metals that previously went without duties. On July 9, imported construction materials like copper wiring, structural components, nails, fasteners and machinery will soon face a 10% cost increase if the country of origin is subject to the tariffs. Although raw copper is exempt, many finished products or alloys used in construction will be subject to the extra fees. Indeed, early signs of the impact are already emerging in price indices. The U.S. Producer Price Index for March showed that industrial metals costs were climbing, driven by tariffs on steel and aluminum, which had been in effect for only a month. Domestically, Trump's tariffs are reshaping the landscape for construction metals, bringing both gains and setbacks. U.S.-based steel producers and aluminum manufacturers stand to gain the most right out of the gate as the new trade barriers tilt the playing field in their favor. However, these gains come with some pain for downstream industries. Construction firms, real estate developers and manufacturers that consume large volumes of metal will encounter higher input costs almost immediately. Industry observers warn of project delays and cancellations if metal prices continue to climb. As both the largest source of U.S. non-North American imports and the world's biggest metals producer, China lies firmly at the center of the tariff storm. Meanwhile, China's real estate boom has cooled dramatically under the weight of debt crises and slowing growth. On a related note, Chinese steel exports recently surged to a 9-year high, and countries like Turkey and Indonesia have already imposed fresh tariffs or duties to block the influx of Chinese steel. By Jennifer Kary More Top Reads From this article on Sign in to access your portfolio
Yahoo
15-02-2025
- Business
- Yahoo
Construction Industry Navigates Trump Tariff Impacts on Steel Prices
The Construction MMI (Monthly Metals Index) held its sideways trend, budging down a slight 1.35%. Meanwhile, the U.S. construction industry faces a complex landscape shaped by recent policy changes, Trump tariffs and other economic factors. Steel remains a fundamental component of modern construction, playing a crucial role in buildings, bridges and infrastructure. Key materials such as H-beam steel and steel rebar provide essential strength and reinforcement for dozens of types of projects. But with a newly imposed 10% tariff on Chinese steel imports, contractors and developers will likely experience some price increases. In 2024, China's steel exports climbed to 110.72 million metric tons, reflecting a 22.7% rise from the prior year. This surge largely stemmed from declining domestic demand, which prompted Chinese manufacturers to offload surplus steel into global markets. As a result, international steelmakers faced mounting pressure to lower their prices in order to compete. Much of China's exported steel comprises construction-focused materials, including H-beam steel and steel rebar. With the enforcement of the 10% tariff on Chinese steel and the possibility of an even steeper 25% tariff on all steel imports, procuring these materials from China is becoming less financially viable. As the price of imported steel and aluminum rises due to the Trump tariffs, the construction industry is bracing for potential financial strain. Many firms argue that higher costs may lead to project delays, scaled-down developments or increased expenses that will ultimately be passed on to end-users. Small business owners across the construction sector, who are already grappling with tight profit margins due to persistently high interest rates, worry that these tariffs could exacerbate their financial difficulties. Despite the immediate challenges, some industry experts argue that these tariffs could benefit the domestic steel and aluminum sectors in the long term. By making foreign materials more expensive, policymakers aim to promote domestic production, potentially fostering increased investment in U.S. manufacturing and creating new jobs in these industries. For instance, the construction industry saw substantial price increases during the COVID-19 pandemic due to labor shortages, supply chain interruptions and increased demand. In addition to this, materials like steel and lumber saw price increases during the pandemic that were far higher than anticipated price increases under the new tariffs. According to this historical comparison, tariffs may have a more predictable and controllable effect than the market instability that occurred during the pandemic, even though the current Trump tariffs will still raise expenses. Industry organizations urge construction firms to be proactive in navigating these pricing fluctuations. The Sheet Metal and Air Conditioning Contractors' National Association (SMACNA) recently advised companies to adjust contracts in anticipation of cost increases and to explore domestic sourcing options where practical. Price changes in the aluminum industry since aluminum tariffs were announced by the Trump Administration. Source: MetalMiner Insights Additionally, many businesses are leveraging market intelligence tools such as MetalMiner to stay ahead of price movements. Platforms like MetalMiner provide real-time metal price updates, forecasts and cost analysis tools, helping companies make informed purchasing decisions and implement strategies to reduce tariff-related expenses. By the Metal Miner team More Top Reads From this article on Sign in to access your portfolio
