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ABSTRACT: When considering construction costs, materials have an enormous effect on the overall cost of the project. Within recent years, there have been unprecedented price spikes for vital construction materials such as steel, copper, cement, and one very important indirect construction material, fuel. The worldwide economy is ever-changing and people throughout the construction industry have seen direct effects from things such as rising energy costs and a construction boom in China that is creating huge worldwide demand for materials. When considering materials, fuel costs in particular play a major role in how they are priced. Even with a stable supply and demand, certain materials still must be shipped. When fuel costs spike, such as recently, there is a direct effect on the shipping cost of all construction materials. Another global driver in material costs has been the incredible demand that China has put on the industry for materials. It is possible that projects have been delayed or cancelled in recent years because of the incredible pull for materials such as steel from China. In 2007, it appeared that the inflationary shock of 2004-06 was starting to fade; it looked like markets had made the proper adjustments, and the industry would get a break from inflation. But that respite was shortlived. By the second quarter, rebar, structural steel and copper were heading back up. Estimators say they now are bracing for a second big wave of price escalation. The volatility in the price of construction materials is unlikely to subside anytime soon. China's economy shows no signs of slowing, and energy costs will continue to drive costs throughout the construction industry. In the face of these uncertainties, a contractor's best protection is to understand the factors that affect its markets.
KEY WORDS: Construction, costs, economy, fuel, inflation, materials, pricing, and projects
Construction and the necessity for materials will never go away. As seen in recent past, construction materials are extremely volatile, and some have outpaced inflation many times over in particular instances. Many factors affect the cost of construction materials. This article will discuss, in the author's opinion, two of the major factors affecting those costs in today's society, attempt to interpret recent price spikes, and then report experts' forecasts. The two factors affecting material...