Building materials bounce back

Despite the lack of construction activity regionally and nationally, prices for most materials that builders use are trending upward from deep lows in late 2009.

Buck Yeagar, president and chief executive officer of Reno Lumber in Sparks, says lumber prices have risen 50 percent and plywood panels 70 percent from their lowest levels of 2009. Yeager says prices fell hard last year due to weakened demand as residential construction the prime driver of sales in the lumber industry evaporated.

Despite the reduced demand, lumber mills still had stockpiles of logs that needed to be processed, and contracts that had to be fulfilled with logging companies, which resulted in an oversupply that further eroded prices.

However, earlier this year, Yeager says, mills ratcheted down production, and many implemented rolling shutdowns and reduced work shifts to bring supply back in balance with demand.

"There were times when certain items were hard to get," he says. "That created the price increases we saw in the first quarter of this year."

Steel prices also have risen, primarily due to an uptick in work on the East Coast and from a rise in stimulus-related projects, says Mario Bullentini, executive vice president of Martin Iron Works in Reno.

Although demand for structural steel and steel bar remains extremely soft regionally, Bullentini says, prices are dictated by national demand rather than regional economies. As a result, they've see-sawed during the past 12 months.

The price for heavy structural steel last year rose to 58 to 62 cents per pound, but retreated in January and February to 48 to 49 cents. Currently structural steel sells at 52 to 53 cents per pound.

A glut of common bar stock flat bar, round bar, angle iron led to a decline in prices, and Martin Iron Works stockpiled some of the material, but prices began rising in March and April, Bullentini says.

Bullentini doesn't see steel prices trending much higher the rest of the year.

"Steel will edge itself up, but it won't take huge spikes because there is not enough work. They have schooched up, but nothing of the magnitude of where they were before."

Frank Cavalier, materials manager for Sierra Nevada Construction and manager of the company's asphalt and aggregate plant in Mustang, says the price of asphalt oil typically trends upward in June, July and August, the height of seasonal paving work.

Asphalt oil makes up more than 50 percent of the cost of asphalt, and asphalt oil doesn't follow the price of crude oil.

"When fuel prices are high, refiners generally are making more fuel and that leads to less supply of asphalt," Cavalier says.

Kevin Robertson, president of SNC, says that despite wild swings in the price of gasoline over the past few years, the price of asphalt oil and asphalt has remained fairly constant over the past four years, with small fluctuations in overall production and supply. However, the national rise in stimulus spending-related construction jobs could result in tightened supplies.

"Many of the stimulus projects coming out are paving related because it is easy to spend money on paving jobs," Robertson says. "You get them out pretty quickly and put people to work. Those jobs will take up available oil."

Costs for aggregate have softened due to weakened demand. Companies have lowered prices in an attempt to increase volume, Cavalier says.

Brian McClure, assistant plant manager for Granite Construction, says oversupply in the Reno-Sparks market has held down prices for aggregate.

However, McClure is hopeful that prices will climb in the last two quarters of the year due to bidding of late-season public roadwork, and an increase in private work in the regional market.

Prices for cement have flattened. Eagle Materials, operator of a large cement plant in Fernley that supplies regional concrete companies (cement is to concrete as flour is to bread) says cement prices from its plants throughout the West haven't budged much from the low levels they reached in early 2009.

Weakened demand from the residential housing and commercial construction sectors led to declines in sales, the Dallas-based company says.