Metal prices level off during Q1 suggesting signs of easing in construction industry

The first quarter of 2009 saw the decline in the price of metals ease off from the dramatic falls seen in the last three months of 2008, according to BDO’s Construction Commodities Index.

The price construction firms paid for aluminium, copper, lead, tin and zinc in Q1 all fell at a much lower rate than the price paid in Q4 2008.  The only exception was steel, which declined at 1.5 times the rate it did last year.

Richard Kelly, Head of Construction, at BDO says: “The construction sector has had to try and wear significant price hikes over the past 12-18 months which, coupled with the downturn in the global economy, have nearly crippled the sector.  The fall in metal prices, although not as dramatic as the previous quarter, will still come as a welcome relief to the sector.”

“Looking at the bigger picture though, the results suggest that metal prices are starting to show signs of easing.  It would be too optimistic to state that these are the first signs of ‘green shoots in the construction sector’ as demand for metals and therefore construction projects increases, but they could be amongst early indicators that the market is beginning to level out,” he continues.

Copper shows biggest sign of recovery

The commodity showing the biggest sign of recovery during the quarter was copper, which showed a fall of only 1 per cent compared to a fall of 51 per cent in Q4 2008 – a fall of 50 percentage points (see table below).  This was followed by lead, zinc and tin (down 35, 34 and 27 percentage points respectively)  Aluminium moved the least falling by only 10 percentage points, whereas steel prices increased by eight percentage points during the quarter.

“Copper is often seen as one of the bell weathers of the economy – when it levels off or increases then economists start to get excited.  The price of copper has slowly been increasing throughout the quarter, breaking through the US$4000 mark for the first time in nearly five months.  If the weakening dollar continues apace and the Chinese continue to re-stocking their supplies for construction, then we could well be seeing a positive effect on the UK’s construction market in the near future,” concluded Kelly.

ENDS

For more information, or to obtain graphs or tables behind the figures, please contact Dee Crooks at BDO on 020 7893 2761/07815 172 051 or email dee.crooks@bdo.co.uk

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