| Analyst: Construction
Costs 'Through the Roof'
Construction costs are "going through
the roof," said Ken Simonson, chief economist of the Alexandria, Va.-based
Associated General Contractors of America.
The cost for highway and street
construction leaped 16 percent, nearly 10 percent for other heavy construction
and eight percent for building construction.
Moreover, the price index
for copper and brass mill shapes was up 21 percent; asphalt, 18 percent; gypsum
products, such as wallboard, 15 percent; plastic construction products, 13 percent;
and concrete products, 10 percent.
In contrast, the core rate of consumer
and producer price increases - omitting food and energy costs - had risen only
about two percent in the past twelve months.
"The worst news has been
about diesel fuel, which affects contractors in three ways," Simonson said.
"The producer price index for diesel jumped 59 percent from October 2004
to October 2005. That directly raises the cost of operating off-road equipment
like tower cranes and bulldozers."
Precast Concrete Sales Up 13 Percent in 2004 The Indianapolis-based
National Precast Concrete Association announced that American and Canadian precast
plants had $18.5 billion in 2004, a 13 percent increase from 2003.
Ty Gable,
president of the organization, attributed the growth to residential housing and
wall panel components. Other sectors reporting strong growth included grease interceptors
used in commercial buildings and stormwater products.
The precast industry
used an estimated 13.7 million tons of cements in 2004 and produced about 48.1
million cu. yds. of concrete, the group said.
Highways, Airports to See Spending Increases Spurred by a combination of renewed
economic growth, emergency repair work following Hurricane Katrina and a new law
that increases federal investment in highways, the U.S. highway and airport construction
spending should grow in 2006.
William Buechner, chief economist for the
Washington, D.C.-based American Road & Transportation Builders Association,
projected highways to go up 5.4 percent and airports to see 20 percent growth
in 2006.
Tempering his remarks, he said that a real question is how much
of the growth will be absorbed by rising construction costs.
The value
of construction work performed on highway and bridge projects is projected to
be a record $70.3 billion in 2006, up from $66.9 billion in 2005, according to
ARTBA estimates.
Several factors should help support market growth next
year:
State and local budget improvements: Strong economic growth has boosted
general state tax revenues and there is much less pressure to dip into highway
funds to balance state government budgets.
Safe, Accountable, Flexible,
Efficient Transportation Equity Act - A Legacy for Users (SAFETEA-LU) was signed
into law last August. SAFETEA-LU guarantees a record $286.5 billion transportation
investment level from 2004-09 and provides predictability in federal funding for
highway construction.
The Bush Administration has requested $2.3 billion
in general fund revenue to help repair and rebuild highways and bridges damaged
during the Hurricane Katrina, providing an additional one-time market boost in
2006.
The value of construction work performed on airport runways, taxiways
and related projects will total about $6.1 billion in 2005 - a 20 percent increase
over 2004.
Strong growth should continue into 2006, due to the resurgence
of air travel, a $50 million boost in federal investment through the Airport Improvement
Program, and the recent increase in passenger facility charges that many larger
airports use to finance construction projects.
$5.4 Billion Bill Aimed at Protecting Against Floods Congress has moved
to increase the U.S. Army Corps of Engineers Civil Works program by approving
the $5.4 billion appropriation for 2006.
The appropriation is $1.2 billion
more than the Bush administration's 2006 proposal. It is also the largest appropriation
of funds for the Civil Works program in years.
The Civil Works program
provides for transportation of goods on the nation's water highway but also protects
communities in the event of flooding or storms and provides much-needed hydropower,
water supply, industrial cooling and recreation.
Some contractors consider
increased investment in the nation's Civil Works program a major priority for
Congress.
Marketing Campaign On Coal Launched St. Louis-based Peabody Energy is launching
an information campaign about coal.
The campaign, "Yeah, Coal Can Do That,"
is aimed at emphasizing the coal conversion technologies that reportedly can improve
U.S. energy costs. Other topics include abundance, affordability and clean use.
Ads are being placed in major newspapers and magazines.
A Web
site was launched with information on coal's role in energy, coal-to-gas, coal-to-liquids
and hydrogen, www.coalcandothat.com.
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