Lower energy costs, a sluggish recovery and cheap imports, especially from China, have combined to slow construction inflation. In the first quarter of this year, a group of six general-building cost indexes tracked by ENR averaged annual gains of just 1.6%, down from 1.9% during the previous quarter and 2.6% a year ago. Compiled by Power-Advocate, construction costs for gas-fired power plants are down 5.2% from the first quarter of last year.

“Material prices are flat, but we are seeing some inflationary pressure in our subcontractor bids,” says John Marino, chief estimator with Sierra West. The firm’s index measuring subcontractor costs is up 8.5% for the year, while its general-building cost index shows an annual increase of 3.4%. Both indexes measure costs in the relatively robust San Francisco area, where some subs are adding 1% a month to cover inflation between the time they submit a bid to the time they get a notice to proceed, says Marino.

However, in most regions, construction inflation remains subdued, partly due to the collapse in energy costs. The forecasting firm IHS Global Insight estimates that West Texas Intermediate’s crude spot price will fall another 21.2% this year, after tumbling 47.5% last year and 5% in 2014. Similarly, IHS expects gasoline prices to decline another 11.7%, following last year’s 35.8% drop. Natural-gas prices also are expected to slide another 11.9% in 2016, after falling 40.2% last year. After the next round of cuts, energy prices will bottom out, and IHS is forecasting annual increases in 2017 of 21.5% for crude oil, 11.2% for gasoline and 16.0% for natural gas.

Prices for structural steel and concrete reinforcing bar also are experiencing huge cuts. The main culprit has been the free fall in scrap prices, which is the primary source for most construction steel. On average, scrap prices declined 39.1% last year, and IHS estimates they will fall another 27.4% during 2016 before bouncing back 10.1% next year. Scrap prices are currently at $155 a ton, compared to a peak of $411 a ton in 2011.

This collapse in scrap prices, combined with lower energy costs, helped to pull rebar prices down 13.7% in 2015, while prices for structural steel fell 11.1%. “The downward trend in pricing should continue through the first half of this year,” says John Anton, steel analyst for IHS. His forecast calls for rebar prices to drop another 13.7% this year, then post a modest increase of 2.5% in 2017.

“Domestic rebar producers had applied for import protection and received some relief from Mexican imports,” says Anton. “Turkey still remains a major supplier of cheap rebar imports, and if the industry also can get some relief from Turkish imports, it would help to prop prices up,” says Anton. Rebar prices are now at $499 per ton, compared to $644 a year ago.

“Structural-steel prices have not fallen as far as rebar, so the slide in structural prices should be extended through 2018, although at a declining rate,” Anton says. He predicts that structural-steel prices will decline another 9.6% this year, averaging $636 per ton. This level is down from a recent peak average price of $792 per ton in 2014. Anton predicts the price will continue to fall another 2.0% in 2017, before the decline slows to just 0.6% in 2018. “All in all, prices will be bumping along the bottom for the next few years, so it’s a good time to be a buyer. You are not going to over pay,” he adds.

“We see construction markets being relatively flat and do not see a big push on the demand side on material prices,” says Deni Koenhemsi, construction materials analyst for IHS. Seven years into the recovery, Dodge Data & Analytics is forecasting only a 6% increase in total construction starts for 2016—not enough to power inflation. “Inventory is oversupplied for may materials, and the production cost input are very low,” Koenhemsi says.

The transition from lower oil prices to lower asphalt paving prices has not been as big as one would suspect, says Koenhemsi. IHS is forecasting that the cost of asphalt paving products will fall another 1.7% this year, after declining 3.2% in 2015. A modest rebound of 3% a year should follow until 2018.

Cement-price increases have been the exception until now. The Bureau of Labor Statistics’ producer price index for cement in February was up 4.6% for the year, one of the highest annual escalation rates measured by BLS. Koenhemsi thinks that level is the peak inflation rate for cement and expects it to fall to 5.3% in 2016 and 2.5% in 2017 from 7.9% last year.