Broad Measures of Construction Material Costs Hide Rebounding Copper Prices

Broad measures of construction material prices have pointed to a sharp slowing of year-on-year price increases for said materials. The Bureau of Labor Statistics Producer Price Index for construction materials which registered 30% and greater annualized price increases between June 2021 and January 2022, marked its first annualized contractionary reading of -2.36% at the end of 2022.

Broadly speaking, material construction prices at the end of 2022 were slightly less than at the beginning. However, the supply and demand dynamics that drive the price trends of any specific commodity or product can, and do, at times, buck the trends captured by broader measures of prices. In recent months this has been true of copper products which have seen a double-digit rebound in prices since their November lows.

The driver of this surge in copper products is two-fold, with South American supply coming in below expectations while demand for copper strengthens as China ends its COVID-19 restrictions on its economy and strong demand for electric vehicles, batteries, and related equipment is resulting in ever higher demand for copper.

Neither the supply nor demand issues that are driving prices higher are expected to resolve themselves in the near term. This could mean for the construction industry years of strong copper product prices despite waning prices for construction materials more broadly.