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Infrastructure Projects Provide Support Amid Falling Steel Prices

  • The Construction MMI fell by 5.04% due to sliding steel prices, although there was a slight rebound in H-beam steel and steel rebar prices within the first two weeks of June.
  • Ongoing wildfires in Quebec, Canada, are negatively impacting U.S. construction projects, particularly in New York City, due to reduced visibility and poor air quality, leading to delays and potential economic implications.
  • The U.S. debt ceiling situation caused uncertainty in the construction industry, potentially leading to delays or cancellations of projects, which could also have a broader impact on the overall economy.

Via AG Metal MIner

The Construction MMI (Monthly Metals Index) stayed within a tight range, but dropped more than in the previous three months. Overall, the index fell by 5.04% month-on-month. Meanwhile, steel prices continued to slide, which brought noticeable bearish pressure to the index. However, within the first couple weeks of June, H-beam steel and steel rebar prices began to rise again. While bar fuel surcharges managed to increase, they did not add any noticeable support to the index between May 1 – June 1.

Canadian Wildfires Impact Construction in the Eastern U.S.

Over the past month, smoke from the ongoing wildfires in Quebec, Canada placed a “fog” over certain U.S. construction projects. According to Forbes, the smoke significantly impacted construction and urban activity across the U.S. particularly in New York City. The smoke became so dense that it severely impaired visibility, making it difficult for construction workers to see what they were doing. Working outside also became nearly impossible due to poor air quality. This led to delays for numerous building projects, which could have a huge impact on the U.S. economy.

The wildfires in Canada have been blazing since early June and show no signs of abating. According to Reuters, smoke continues to enter the northern border of the U.S. from Canada, where the wildfire season began unusually early. While the smoky conditions have temporarily subsided, the problem may persist as experts do not expect the wildfires to die down for some time. And if more smoke blows down to the Eastern U.S., construction projects could be hampered further.

Infrastructure Projects Add Support to Steel Rebar

Steel prices continue to drop from the peaks seen earlier this year. However, due to the Bipartisan Infrastructure Deal, infrastructure spending continues to add support to materials like steel rebar and h-beam steel. So far, construction steel, aluminum, and other metal commodities remain in high demand thanks to government funding. However, even infrastructure must contend with elevated construction costs due to inflation. Rebar, for instance, bottomed out on June 8th and did so below support zones.

The shift in pricing hardly proved surprising. Indeed, mill lead times for steel recently hit a low not seen since August of 2022. In the case of steel, this type of movement typically indicates a price reversal.

The warmer months of the year also help add support to the construction sector. With warmer temperatures and longer days, construction becomes easier, but also more rigorous. These factors will continue to support infrastructure and the construction of buildings and housing. Despite this, overall demand for metals continues to struggle, which will work against construction initiatives in the short term.

Debt Ceiling Woes: How Will They Impact Construction?

Debt ceiling issues in the U.S. dominated headlines for months due to the enormous consequences that come with breaking the debt ceiling. Indeed, doing so would not only threaten construction but could be catastrophic for the U.S economy as a whole. In fact, the crisis has already significantly disrupted financial markets, harmed housing construction, and worsened corporate economic circumstances. This also means that contract awards or orders could end up on hold.

Should the debt ceiling situation continue, the U.S. construction sector will feel the impact for months or even years. Therefore, contractors will have to make difficult decisions about the expenditures they continue to incur. For instance, prime contractors should inventory their prime contracts and subcontracts to determine how the various parties will pay. Along with this, contractors should determine the impact of federal government nonpayment. Still, construction projects may be delayed or canceled in the long run, which could lead to an overall drop in building activity. Such a decline would also have a knock-on effect on the economy as a whole.

By Jennifer Kary

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