The price of war in Ukraine on U.S. construction
By Paige HaeffeleFebruary 28, 2022
The full effect of the crisis in Ukraine is yet to be seen, however, industry experts from leading construction organizations are weighing in on the projected impacts it might have on the industry.
“Russia’s unjustified attack on Ukraine has already pushed up the price of diesel fuel, gasoline and other petroleum products used in construction,” said Brian Turmail, vice presudent, public affairs and strategic initiatives of Associated General Contractors of America (AGC). “The war and counter measures by western nations are likely to affect the supply and cost of materials and equipment, including steel, aluminum, copper, zinc and nickel soon.”
Anirban Basu, chief economist with Associated Builders and Contractors (ABC), further describes potential supply chain issues, but with a somewhat different spin.
“There are three first-order impacts, and two of them are positive,” he states. “The first impact is the negative one, and it relates to materials prices. The Russians are significant producers of a number of key metals, including copper, aluminum, palladium, platinum and nickel. Copper and nickel, which are used in the manufacture of stainless steel, so they are especially important.”
“The Russians are also significant producers of oil and natural gas. Construction input prices are already elevated, and this would tend to put further upward pressure on prices,” Basu said.
These price increases only put further pressure upon those created by shortages and supply chain issues caused by the Covid-19 pandemic.
The second impact of war on the construction industry relates to monetary policy.
“Coming into the crisis, the notion has been that the Federal Reserve would tighten monetary policy significantly in 2022. While that is still likely to occur, the economic dislocation and uncertainty generated by the Russian assault on Ukraine may eventually take one or two rate hikes off the table,” Basu said, which is generally good news for construction contractors.
The third impact Basu predicts relates to the nation’s defense sector, which will receive a significant bump in orders, thanks to the crisis.
“Many of these orders will come from the U.S. government, others from foreign governments. Increased production often translates into industrial facility improvement and construction,” he said.