Construction industry outlook: Raw materials price trends in 2024

What is the outlook for key raw materials in the construction industry in 2024, including steel, scrap, aluminium and lumber?

In this article, Fastmarkets takes a closer look at the 2024 market outlook for some of the key materials used in the construction industry – steel, scrap, aluminium and lumber. We’ll take a look at their projected price trends and the factors influencing these commodity price forecasts.  

If you’re interested in reading more about the forecasts for other crucial materials, we’ve put together a 2024 commodity market outlooks hub here.  

US steel long products slightly flat

As we expected, US long steel product prices were flat to slightly up over the past month despite the negative effect that the wintry weather has had on construction activity. But we believe that impact to be temporary in nature and that soon the market will likely see its usual first quarter bump.

Several factors could support that. While to date the impact of recently passed legislation upon the construction and manufacturing sectors has been limited, we believe that activity will pick up as the year progresses, especially once the Federal Reserve begins to step down interest rates. However, with the American Institute of Architects’ Architecture Billings Index remaining contractionary at 45.4 points in December, it is uncertain how many new nonresidential construction projects will be added into the pipeline. 

Scrap market prices facing pressure in near-term

In the scrap market, we broadly anticipate that 2025 will be a moderately stronger year for scrap prices than 2024, with this primarily driven by an expected rebound in electric arc furnaces (EAF) output across much of the globe. Nevertheless, in the near term, prices across much of the globe are expected to face pressure in part as downstream steel demand is fragile, limiting upward potential for scrap demand and prices. 

In the US scrap market, prices are expected to cool in the near term. Meanwhile, in Europe, Fastmarkets anticipates some further weakening in ferrous scrap prices in the near term amid sluggish downstream steel demand indicators, notably in terms of construction sector output.  

But scrap prices are not anticipated to crash amid a projected slight recovery in crude steel production within the EU and in Turkey this year. Moreover, in the medium term, while reconstruction activity in Turkey has been slow following last year’s earthquake, some works will likely start to take place this year, which should provide some steel demand and, in turn, bolster scrap requirements.  

In India, demand is facing some pressure currently as spreads between steel and scrap are tight amid slowing construction, helping pressure steel producer margins. The spread between domestic rebar and imported HMS #1&2 (80:20) scrap was $142 per tonne in late February, well below the long-term average across 2015-2023 of $174. This will help dampen Indian scrap requirements in the near term and may encourage consumers to also turn to lower priced domestically produced direct reduced iron (DRI), which was assessed at $333 per tonne ex-works in late February, $47 per tonne below HMS #1&2 (80:20) scrap. 

Discover the latest short-term forecasts for the ferrous scrap market in one place with Fastmarkets short-term forecasts and analysis. Understand market trends and anticipate what’s ahead.

Aluminium price recovery expected to come later in 2024

The aluminium price has seen range-trading recently, with a decline since October attempting to stabilize. Initially, optimism regarding China’s economic recovery led to an overestimation of its stimulus measures, but disappointment in its performance shifted sentiment to pessimism, impacting base metal prices. 

However, there’s a belief that the market is now underestimating China’s potential for growth-supportive policies, which could prompt a scramble if the economy strengthens. Our base metals outlook suggests a gradual stabilization in the latter months of the year, with expectations of a more favorable macroeconomic environment as China’s recovery accelerates, potentially influencing base metal prices positively. While there may be further downside pressure, lower values are expected to attract dip buyers, contingent upon evidence of follow-through buying to justify a positive year-end outlook. 

Navigate the complex base metals market with the latest short-term forecasts in one place. Learn more about our base metals forecasts today.

Lumber prices generally on a steady upswing

The good news for lumber mill operators is that the worst of the pain appears to be behind us now. Lumber prices across most species and dimensions found their floor in the fourth quarter 2023. Most items have been on a steady upswing since then as buyers begin to stock up for the spring building season. After falling to just $373 per MBF in November, the Fastmarkets Random Lengths Framing Lumber Composite Price (FLCP) has rebounded and then averaged about $400 per MBF in January 2024. However, this is still lower than the index average last year of $411 per MBF. So, while mills are happy with the direction prices are moving, at these levels, the industry is still feeling pain, with many mills running with variable costs of production in the range of $400-450 per MBF. The market saw some modest erosion in February, with the FCLP averaging $389 per MBF, though the final week in the month showed an upward trend 

The market balance should allow for a steady increase in lumber prices throughout 2024 for most dimensional and industrial-grade items as demand growth advances faster than supply. However, at 80% operating rates for the year and a substantial amount of temporary downtime being taken, there is enough spare capacity available to step into the market this year that any major rally will be stunted by a supply response. Offshore supply has also shown its ability to respond to and quell major price rallies given the flexibility of European producers. 

Find out more about Fastmarkets’ new repair and remodeling index for those operating within the wood products markets who are looking for much-needed visibility in this often opaque segment of the market.

Slow macroeconomic outlook

The macroeconomic outlook for 2024 could be characterized by a general slowness, as it’s unlikely to be a year of solid growth for global economies. There are three key factors influencing purchasing decisions.  

  1. High inflation will impact consumer demand and play a critical role in North American and European economies, while China’s consumer behavior will also be crucial given it provides so many goods consumed globally 
  2. The significance of renewable energy and electric transportation in the global economy, amidst geopolitical risks and potential positive impacts from decreased interest rates on consumer spending 
  3. India’s potential expansion in the global economy, particularly in maritime transport, indicating significant growth potential. 

Want to get the full picture of the macro factors impacting purchasing decisions? Get more details and analysis in this extended macroeconomic outlook for 2024 here.

Get more coverage of the raw materials prices critical to the construction industry

For industry participants navigating this complex landscape, having access to market-reflective price data and in-depth analysis is crucial. Stay informed with Fastmarkets’ comprehensive market intelligence and forecasts, which will help guide your strategic business decisions and keep projects profitable in 2024 and beyond.  

To learn more about Fastmarkets’ construction suite, visit our dedicated construction industry hub today.

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