Construction Costs Rise in February; Steel, Equipment Prices Climb

by Christopher Brinckerhoff | 31 March 2025 6:00 am

[1]Engineering and construction costs increased again in February, according to the Engineering and Construction Cost Indicator from PEG and S&P Global Market Intelligence[2]. The headline Engineering and Construction Cost Indicator, a leading indicator measuring wage and material inflation for the engineering, procurement, and construction sector, saw a modest increase to 60.5 in February. The sub-indicator for materials and equipment costs increased by 3.7 points to 64, while the sub-indicator for subcontractor labor costs decreased to 52.2 in February from 53.4 in January.

The materials and equipment indicator saw a modest increase in February. Nine of the 12 components increased compared to in January. The increases were widespread, and most categories saw fairly sizable increases. Seven categories saw double-digit increases compared to January, including two steel categories and all of the machinery, equipment, and electrical machinery categories.

Pumps and compressors saw the largest increase (up 17.5 points), followed closely by gas and steam turbines (up 16.1 points). Fabricated structural steel saw a relatively minor 5.6-point increase and settled at a neutral reading, joining ready-mix concrete, which was unchanged at 50 in February. Meanwhile, both ocean freight categories saw very large declines of 26.7 points and 27.8 points, respectively, for routes from Asia to the United States and Europe to the United States, each settling in contractionary territory with readings of 33.3 in February. Following its 15.6-point jump in February, carbon steel pipe registered a reading of 60, the first above 50 since April 2023.

“Pipe prices bottomed in late 2024 but are set for large near-term increases due to higher steel input costs and tariffs on imports,” says Thomas McCartin, principal economist at S&P Global Market Intelligence. “The U.S. market is heavily supplied by imports, and the U.S. administration’s move to remove exclusions and exemptions from Section 232 tariffs will mean all steel imports into the U.S. soon face a 25 percent tariff.”

The sub-indicator for current subcontractor labor costs decreased slightly, falling to 52.2 after a reading of 53.4 in January. Despite this decrease, most categories remain unchanged at readings of 50. The only category that remains above neutral is instrumentation and electrical contractors in the United States South region, which saw a modest 5.4-point increase to a reading of 62.5 in February.

The six-month headline expectations for future construction costs indicator saw another substantial increase to 85.6 in February. The six-month expectations indicator for materials and equipment came in at 83.1, 3.1 points higher than in January’s figure. Almost all categories saw increases, with ocean freight from Asia and Europe to the U.S. registering the only declines. Only one of the 12 categories saw increases greater than 10 points in February, unlike the seven categories that saw significant increases in January. Still, the widespread increases show expectations for price increases in all categories over the next six months. All 12 categories had readings between 66.7 and 90 in February, with most over 80.

The six-month expectations indicator for subcontractor labor also saw a significant increase of 15.4 points in February after an even larger 26.3-point rise in January, continuing the return to strongly inflationary territory with a reading of 91.7. All regions and categories increased in February, with many registering readings of 100, indicating that all respondents expect higher prices.

Respondents report expected shortages of craft workers as mega-projects and new liquefied natural gas projects come online later in 2025. Additional market comments suggested the construction markets are not moving as quickly as anticipated.

Source URL: https://www.metalconstructionnews.com/news/industry-news/construction-costs-steel/

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