Article source: ConstructConnect
As with most things pandemic-related, it’s hard to know where the cost of construction will land six months, or a year, or two years from now. Set out below are ten ways in which costing in the sector is likely to be impacted in the period ahead.
A Commodities Dependency for Materials:
(1) Commodities are the basic building blocks of everything, including materials used in construction. As an asset class, they will stay undervalued until the global economy picks up a great deal more steam than it is currently exhibiting. Over the past two decades, China has embarked on several massive infrastructure spending programs that have drawn in nearly half of world copper, nickel, iron ore (for steel), aluminum and cement/concrete supplies.
To kick-start its economy again, after a coronavirus-induced shutdown early this year, China has announced it will initiate another round of infrastructure spending. This time, though, most of the focus won’t be on building roads, transit projects, railways and airports. Instead, majority funding will go towards boosting the high-tech sectors expected to lead future gross domestic product growth. The emphasis will be on data centers, biotechnology and medical labs, etc.
The uplift in demand for and pricing of commodities from old-style infrastructure projects is well known. New-style infrastructure spending will shift the balance towards other inputs (e.g., lithium, cobalt, etc.), blunting ‘normal’ commodity price movements.
(2) A U.S. economic upturn, especially if residential construction is a primary driver, will have a significant impact in a couple of commodity pricing areas, primarily lumber and gypsum.
