Any construction project manager who has worked on a few projects knows that the prices of materials fluctuate. This can sometimes be problematic, affecting the industry as a whole. During a construction boom, the high demand for materials will cause prices to rise, but this does not paint the whole picture. When a project manager understands the issues that will affect the market, it will be easier to make adjustments and to respond to changes.
Steel is a heavily utilized material in the construction industry. The demand is always high, but this is not usually matched by the supply. Further complicating the issue is the fact that much of the steel used in the US is imported from China. Supply can be affected at any time as China also has a high domestic demand due to its growing economy. This means that at some points, steel may be needed for local projects, which will diminish the supply available for export to the USA. Steel deliveries can also be affected by the shipping inadequacies caused by the need for other types of goods around the world.
Cement is as important as steel to construction, and shortages have caused many problems for the industry. The root of this problem is the high demand for the product makes it difficult for producers to keep up. Delivery delays can be disruptive for any project, and they can prove to be very costly. Another challenge facing project managers is that much of the cement produced around the world is bought by China. This makes it difficult to get cement deliveries in a timely manner. Construction project managers need to ensure that the supply of this vital material will not become an issue.
While the cost of steel and cement tend to fluctuate, lumber prices have been on the rise over the years. Increasing demand due to more construction as the housing market recovers is a factor. The lumber market has also been affected by hurricanes and flooding. Construction project managers can be suddenly faced with higher prices than they originally estimated.
Material prices for a major component of construction contracts. Being caught off guard by sudden price increases can affect the project and the project manager’s reputation. Price protection clauses can be incorporated into contracts to offer a measure of security. It may also be a good idea to buy materials early in the process to guard against sudden increases.