China’s Copper Selloff Spurs Softer Prices for North American Construction Industry

IHS's picture
Printer-friendly versionPrinter-friendly version

El Segundo, Calif. (March 28, 2014)—The liquidation of copper inventories among Chinese manufacturers is having a major impact on the opposite side of the Pacific, contributing to a slowdown in materials cost increases in the North American construction industry this month, according to IHS (NYSE: IHS) and the Procurement Executives Group (PEG).

The materials/equipment component of the IHS PEG Engineering and Construction Cost Index (ECCI) declined to 51.5 percent in March, down from 55.2 percent in February. This represents the lowest level recorded so far in 2014.

Combined with a decline in the labor portion of the index, the headline IHS PEG ECCI decreased to 52.5 in March, down from 55.9 in February. While any reading above 50 still indicates that costs are rising, the drop in the ECCI indicates that increases are not as widespread. The ECCI now has been above 50 for 26 consecutive months.

Illustrating the broad nature of the deceleration, nine of the 12 subcomponents within the materials/equipment portion of the ECCI experienced a softening in price increases compared to the previous month. However, equipment based on copper experienced outright decreases, disproportionately pushing down the overall index.

The PEG copper wire and cable index dropped in March, reflecting the shift in copper pricing and market conditions,” said John Mothersole, research director of the Pricing and Purchasing Service at IHS. “Prices had been falling due to concerns about Chinese market growth. However, pricing is being driven down further by the potential liquidation of copper inventory accumulated in China during the past year.”

The attached figure presents the relationship between the decline in the ECCI materials/equipment index and the price of copper.

Spot market pricing for copper on the London Metal Exchange declined by 3 percent in January, by 1 percent in February and by 8 percent through March 18.

China’s copper conundrum

Chinese manufacturers over the years have built large stockpiles of copper to use as collateral to fund other investments. However, tightening credit conditions are undercutting the attractiveness of these so-called copper financing deals, releasing copper back into the market. As this phenomenon progresses and as China’s manufacturing sector continues to slow down, selling pressure on copper is impacting a number of industries globally, including North American construction.

Soft labor

The other segment of the ECCI—the subcontractor labor index—also is showing some signs of softness. The labor index registered 54.7 percent in March, down 2.9 points from last month.

“While slightly softer, the labor index continues to reflect the strengthening picture of labor costs resulting from the energy boom in North America,” said Laura Hodges, director of the Pricing and Purchasing Service at IHS. “Western Canada continues to post the highest index levels of any region, indicating that a greater proportion of the survey population is observing higher prices. Construction companies are also expressing concern over tightness in skilled labor markets, particularly welders, in the US Gulf Coast region.”

About the ECCI

The IHS PEG Engineering and Construction Cost Index (ECCI) is based on data independently obtained and compiled by IHS from the procurement executives of leading engineering, procurement and construction firms. The headline index tracks industry-specific trends and variations, identifying market-turning points for key projects, and is intended to act as a leading indicator for wage and material inflation specific to this industry.

Each survey response is weighted equally for every $2 billion in spending in North America. Respondents are asked whether prices—either actual paid transactions or company-informed transactions—during the current month for individual materials, equipment, and regional subcontractor rates, were higher, lower or the same as the prior month.

Respondents are then asked for their six-month pricing expectations among these same subcategories. The results are compiled into diffusion indexes, in which a reading greater than 50 represents upward pricing strength and a reading below 50 represents downward pricing strength.

To learn more about the new IHS PEG Engineering and Construction Cost Index or to obtain the latest published insight, please visit:


 About IHS (

IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs approximately 8,000 people in 31 countries around the world.

 IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. Copyright © 2014 IHS Inc. All rights reserved.

About The Procurement Executives Group (PEG) (

The Procurement Executives Group provides a forum to identify and address procurement related issues which will improve the effectiveness of the engineering and construction industry.  Established in 1994 the Procurement Executive Group has been recognized as an Industry authority on Procurement, Materials Management, and Subcontracting topics. PEG is actively involved in supporting research efforts related to these topics. PEG Member Companies include AMEC, Bechtel Corporation, Black & Veatch, Burns & McDonnell, CB&I, CH2M HILL, Fluor Corporation, Foster Wheeler USA Corp., Jacobs, KBR, McDermott International, Peter Kiewit Sons, S&B Engineers and Constructors, SNC-Lavalin, Technip USA, URS Corporation, Wood Group Mustang, WorleyParsons, and Zachry.

News Source : China’s Copper Selloff Spurs Softer Prices for North American Construction Industry

Copy this html code to your website/blog to embed this press release.


Post new comment

2 + 10 =

To prevent automated spam submissions leave this field empty.
Page execution time was 704.99 ms.

Memory usage:

Memory used at: devel_init()=2.13 MB, devel_shutdown()=22.61 MB.