Shortages Persist In Building Materials
Even as Demand for New Homes Falls, Cost of Cement and Copper Skyrockets

By Alan J. Heavens
Philadelphia Inquirer
Saturday, July 29, 2006; F25

Although home builders in many parts of the country report a decline in demand, the shortage of some key building products is continuing.

Chief among the products in tight supply is cement. Although residential-construction starts may be lower now than during the boom of the past five years, public and commercial building consumes more raw material than ever.

"U.S. cement plants are operating at maximum levels, as they did throughout 2004 and 2005," said Edward J. Sullivan, the Philadelphia-based chief economist for the Portland Cement Association. "Persistent low-cement inventories increase the vulnerability to demand surges or unexpected supply disruptions."

Through the first quarter of 2006, cement imports increased nearly 40 percent over 2005 levels, Sullivan said. "Despite the industry's efforts to ensure adequate near-term supply, cement consumption remains extremely strong," he said.

Consumption of cement and other materials would be even greater if the Gulf of Mexico region were rebuilding from Hurricane Katrina faster, said Michael Carliner, an economist with the National Association of Home Builders.

Lumber prices are much lower than at this time last year -- an indication of a slowdown in residential construction.

Random Lengths of Eugene, Ore., which tracks prices of framing and panelized lumber (plywood and oriented strand board), has reported lower prices for both for several weeks.

Panelized-lumber prices are down about $100 per 1,000 board feet from the same period in 2005, and framing-lumber prices are lower by about $60 to $80 per 1,000 board feet.

Many factors are involved in lumber pricing, including the number of mills in operation at any given time. But a recent Random Lengths report said production was lower in the West, and that housing starts in both the United States and Canada have fallen this year, which affects price.

As demand for lumber drops, mills are taken out of operation, and that decline in supply will increase the price.

Carliner said prices were down from a peak in summer 2004, and that he expected the lumber supply this year to be adequate to meet residential-construction needs.

"Prices are down a little on our end, and probably will fall more as the residential market slows further," said Gary G. Schaal, director of sales and marketing for Orleans Homebuilders Inc. in Bensalem, Pa.

Meanwhile, the cost of copper, another important construction material, is skyrocketing. And, according to Carliner, the increases have boosted the average price of a 2,200-square-foot home by $500 since January.

Half the copper used in a typical new home goes for electrical wiring, and as the short-lived and dangerous shift to aluminum wiring proved, there is no good substitute for copper.

Much of the copper used in a house (about 40 percent) is used for water-supply lines. Increasingly, however, waste pipes in both residential construction and remodeling are made of plastic pipe, Carliner said.

Copper water-supply lines have just a slight edge over plastic. The NAHB expects that to change as copper prices continue to increase.

Analysts and producers blame the high prices on China's consumption of copper and speculators hoarding the metal. In contrast, Chinese demand for steel pushed prices of scrap to almost $300 a ton in 2003, but the figure has fallen to half that.

In January 2005, a ton of copper cost $3,000. Today, it's $8,000.

Although more waste pipes are polyvinyl chloride (PVC), there seems to be resistance from plumbers to using it in supply lines.

"Even though the opposition to it is slowly wearing down, it is understandable," said Jim McAleer, vice president of operations for Westrum Development Co. "PVC had a bad rap because if it wasn't crimped properly or was sealed poorly, it would blow apart. The technology has changed and use has increased, but the perception is still there, because when it goes bad, it goes really bad."

Plumbing with copper pipe costs more because "you have to polish, solder and sweat the joints," McAleer said.

The NAHB Research Center in Upper Marlboro has been looking at alternatives to traditional construction materials that are both environmentally friendly and less costly.

Recommended alternatives to copper piping include:

· Cross-linked polyethylene, which is known as PEX and has been adopted by installers of radiant-floor heating since it neither corrodes nor develops pinhole leaks. PEX also resists chlorine and scaling, and uses fewer fittings than rigid plastic and metallic pipe. The piping is approved for potable hot- and cold-water plumbing systems as well as for hydronic heating systems in all plumbing and mechanical codes in the United States and Canada.

· Aluminum plastic composite, a multipurpose pressure piping that can distribute hot and cold water indoors and outdoors, and also is well-suited for under-the-floor heating and snowmelt systems. It is made of aluminum tube laminated to interior and exterior layers of plastic.

· Corrugated stainless-steel tubing, which is used as an alternative to traditional threaded black-iron gas piping for residential, commercial and industrial applications. It consists of a continuous, flexible stainless-steel pipe with an exterior PVC covering. The piping is produced in coils that are air-tested for leaks.

Recommendations to reduce use of lumber, and alternatives to cement such as steel foundations or fly ash cement and fiberglass insulation are available at .

Builders have a number of ways to deal with leaps in materials' prices, including signing contracts with suppliers in advance, said Marshal Granor, a principal in Granor Price Homes in Horsham, Pa.

Sometimes, an effort to avoid surprises has interesting consequences, Granor said.

"In the 1970s, we heard that the price of copper wire was going to go through the roof, so we bought enough wire for 50 houses and kept it in the basement of our building," he said. "But the price went down, and we were stuck with all this expensive copper wire."

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