John P. O'Keefe, a senior vice president of the Clark Construction Group Inc. of Bethesda, the largest construction company in the Washington region, said he first saw price spikes in construction materials last fall, and they haven't let up much since.
"The first item that went up was raw steel, then structural steel and the reinforced steel we use for concrete," said O'Keefe, whose company is building some of the largest projects in the District, including the new, sprawling headquarters for the Transportation Department in Southeast. "Since then, the cost of steel has nearly doubled."
Forrester Construction Co. of Rockville said it lost about half a million dollars on a project at Andrews Air Force Base because the price for some materials went up after it signed the agreement. "We're left holding the bag," said Scott Forrester, a principal of the company.
Meanwhile, in the six months since Rand Construction Corp. bid on turning a massive warehouse in Prince George's County into offices, construction material prices have skyrocketed. Wire mesh, used to reinforce walls and for security, was $30 for a 4-foot-by-8-foot sheet. Now it is $46. Metal studs, used to frame a wall, were a little over a dollar a foot and now cost $2.50. Drywall was $12 a sheet and now is $15.
The cost for redoing the interior of the Prince George's building was supposed to be $12 million, but it has gone up by $400,000, said Matt Merz, a senior project manager at the Arlington-based Rand.
The main reason: American builders are competing for steel, cement and lumber not only among themselves but also with builders in China, where the economy is growing about 10 percent a year. This massive demand comes as housing markets in areas like D.C. are booming, said Kenneth D. Simonson, chief economist at the Associated General Contractors of America.
If interest rates continue rising, construction activity is expected to cool. That could cause prices to drop, and maybe even result in a surplus of some construction items, according to experts. But for now, construction companies are struggling with rising prices.
Take cement. A ton of cement is, on average, almost $84, up 1 percent. The rising price is due to both a surge in construction and a drop in cement imports.
The U.S. produced 85 million tons of cement last year with kiln plants running 24 hours a day, seven days a week, at maximum capacity. Builders in the United States used 107.5 million tons, with imports making up the difference.
In recent times, however, China, with its surge in construction, has been tying up ships that would have been used to deliver cement from Asia, Europe and Latin America to the United States. "China is also importing grain, cotton, scrap metal and other goods, and you need dry-bulk ships, which is the same ship you need to carry cement," said Edward J. Sullivan, chief economist at the Portland Cement Association, a Chicago-based trade group of cement producers.
Sullivan said if shippers have the choice, they prefer to carry the other products over cement. "You can load and unload those kinds of goods quickly, but it's more difficult to do that with cement. It can take several days because it's heavy."
Other construction materials have gone up, too.
The cost of 100 pounds of steel is $31.27, up 21 percent from a year ago, according to Engineering News-Record, which tracks pricing in 20 major cities.
A thousand feet of lumber sells for more than $530, up 20 percent from last year, according to Engineering News-Record.
Plywood prices also are up. Last summer a sheet cost $6; now it is $16, said Michael Carliner, an economist with the National Association of Home Builders, a D.C.-based trade group.
Rising gasoline prices have hit contractors who use fuel-guzzling heavy equipment. Alberto Gomez, owner of Prince Construction Co. in the District, said he had to spend an additional $2,000 to run his fleet of six trucks and other equipment to repave parking lots at Howard University.
Rand Construction's contract enables it to split the increased costs of materials for the Prince George's County warehouse with its subcontractors and the building's owners, said Linda D. Rabbitt, president of Rand, an $85 million a year general contractor she founded in 1989.
Other contractors said the increased prices are causing them to adjust bids on projects. In some cases, property owners are shelving projects.
Boston Properties Inc. plans to add seven stories to a four-story building it owns in Southwest, but the higher steel costs are going to make it harder to make money on the deal. "We've seen steel prices go up, and that's meant you pay more for the sheet metal that goes in duct work, the rebar that goes in reinforcing concrete and the conduit for electrical wiring," said E. Mitchell Norville, a senior vice president and regional manager.
"Hopefully we're going to make it up somewhere," Norville said. "If interest rates stay low, we'll be okay. But if we get rising prices [on materials], and rising interest rates and rents start to fall off, then we're in trouble."
"It's sticker shock," said Gerard Heiber, a vice president at Sigal Construction Corp. of the District. "We've seen it in the private sector and in the public sector."
Dana Hedgpeth writes about commercial real estate and economic development. She can be reached at email@example.com.