...inflation will slip back to 4.1% in 2005, according to projections submitted by 17 countries.

"Everyone who is building anywhere in the world is experiencing some very high inflation," says Morris. "Our offices overseas are reporting [building cost] increases between 7 and 8%, which is about double the previous rate."

Domestically, ENR is forecasting that annual inflation for building costs will slip back to 3.5% in 2005, after increasing 9.7% this year. The forecast expects that the run up in steel and lumber prices will peak in the fourth quarter of this year, then level off during the first half of 2005 before posting moderate declines by year’s end. However, prices should remain well above 2003’s level as most of this year’s price gains hold.

For example, the forecasting firm Global Insight Inc., Washington, D.C., expects structural steel prices to peak at $578 per ton in the first quarter of 2005 and then gradually slide to $520 by the fourth quarter. However, this would still be well above 2003’s fourth quarter price level of $358. Global Insight sees rebar prices falling from $530 per ton this quarter to $418 in the last quarter of 2005. Again, that would be well above 2003’s price level of $316.

Source: Portland Cement Association, Cement Consumption for 2004

The current 27% tariff on imports of Canadian lumber could be cut in half next year if the Dept. of Commerce follows its own preliminary ruling, says Paul Jannke, vice president of wood products for Resource Information Systems Inc., Bedford, Mass. Lower prices for Canadian imports, which account for 34% of the market, combined with a modest decline in residential construction should lead to a 20% decline in 2 x 4 spruce by this time next year. However, that would be less than half of this year’s 43% increase.

Likewise, RISI predicts that prices for 4-ply southern pine plywood will decline 26% next year, after increasing 20% in 2004 and 36% in 2003. OSB prices are expected to decline 30% next year, following this year’s 84% increase.

After posting small annual declines between 2001 and 2003, cement prices this year increased about 6%, says Rob Roy, president of ROI Economic Consulting, Bellevue, Wash. However, the price of imported cement, which accounts for 25% of the market, jumped 12.6%. The rising cost of ocean freight and lack of availability, spurred import prices. "People who bought in the spot market were hit hard," says Roy. He predicts that domestic cement prices will increase another 4% in 2005.