War in Ukraine Impacts Fuel and Material Prices

Published On
Mar 9, 2022

Russia’s invasion of Ukraine is wreaking havoc on diesel fuel and gasoline prices, while exacerbating price and supply pressures on metals, lumber and electrical equipment¾particularly transformers, according to Ken Simonson, chief economist for the Associated General Contractors of America.

“The war in Ukraine and the West’s response are likely to have multiple effects on construction materials costs and availability. The most immediate impact is likely to be on diesel fuel and gasoline prices,” Simonson wrote in his Data Digest on Feb. 25, 2022, the day after Russia invaded Ukraine. Russia is a major exporter of oil and other materials.

Indeed, diesel and gas prices have continued to rise since. The national retail average price of on-highway diesel fuel was $5.13 on March 21, according to the Energy Information Administration. Gasoline prices rose to an average of $4.24.

Certain metals commonly used in construction are also facing price and supply pressures, as cargo ships in the region around the Black Sea have been halted or delayed, Simonson wrote. The war is also exacerbating supply chain and pricing issues for lumber.

“Low sitting inventory at mills and extended lead times on shipments are back to being the norm,” stated New South Construction Supply in its February 2022 newsletter. “Pricing continues to climb as availability continues to decline. Import lumber typically used to help offset domestic supply chain issues is also seeing supply chain constraints.”

Engineering and construction costs rose again in February, recording their 16th consecutive monthly increase, according to a February 2022 report from IHS Markit and Procurement Executive Group. Shipping costs also rose again for the 18th consecutive month, exacerbating prices for copper-based wire, cable prices, electrical equipment and transformers.

“Electrical equipment units remain in tight supply, particularly in the North American market, as a result of prolonged component shortages and high metal input costs,” said David Smith, IHS Markit analyst for electrical machinery and equipment. “One category in particular, transformers, is experiencing the worst of these effects, as manufacturers struggle to acquire grain-oriented electrical steel (GOES) tonnage. GOES steel is on allocation in the United States and is only made at one mill domestically, which has further tightened domestic transformer supply. These high input costs coupled with shipping backlogs will support price increases for electrical machinery through the end of 2022.”

Meanwhile, prices for rebar and wire mesh remain flat, Simonson wrote, adding that polyethylene vapor barrier has also remained flat over the past month, “but like lumber, the lead times have begun to stretch out.”

About the Author

Katie Kuehner-Hebert

Katie Kuehner-Hebert has more than three decades of experience writing about the construction industry, and her articles have been featured in the Associated General Contractor’s Constructor magazine, the American Fence Association’s Fencepost, the...

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