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Price of steel falls

The price of key commodities used in construction projects rallied during the second quarter of 2009, with the exception of steel, according to the latest edition of BDO Stoy Hayward’s Construction Commodities Index.

Copper and lead were the biggest movers, both increasing by 34 per cent on the previous quarter, followed closely by zinc and tin, rising 28 and 27 per cent respectively. Aluminium prices rose by 12 per cent. However, steel prices were the exception, falling by 15 per cent during the quarter.

BDO Stoy Hayward Head of Construction Richard Kelly said: “The rise in commodity prices during Q2 can be attributed to a number of factors: the fall in the US dollar, increasing investor confidence and the fact that China has been stockpiling commodities – particularly copper.”

“We’ve now had two quarters of more robust commodity pricing; however, we are still remaining cautious about the recovery of the construction industry. Whilst we don’t want to be pessimistic, the construction sector is particularly fragile at the moment and there is still a great deal of uncertainty. The reality is that the recovery of the industry will be some time away,” continues Kelly.

Despite commodity prices having increased during Q2, they are still significantly lower than the same period a year ago and have a long way to go to reach a more robust level. Aluminium is down 49 per cent on a year ago, steel prices are 45 per cent lower and copper is down by 43 per cent in comparison to Q2 2008.

“Many analysts are predicting that Q3 could see prices falling again, which could indicate that the level of construction work was drying up,” said Kelly. “The key will be to watch the BRIC economies closely over the coming months to see if level of demand for commodities increases and has a positive knock on effect for the UK industry.”

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