Engineering and construction costs continue to increase in June, but steel price increases appear to be waning

Engineering and construction costs increased again in June, according to the Engineering and Construction Cost Indicator from PEG and S&P Global Market Intelligence. The headline Engineering and Construction Cost Indicator, a leading indicator measuring wage and material inflation for the engineering, procurement and construction sector saw a modest decline to 68.2 this month, but remains elevated. The sub-indicator for materials and equipment costs decreased 9.4-points to 62.7 while the sub-indicator for subcontractor labor costs rose to 81.3 in June from 71.4 in May.

The materials and equipment indicator saw a second month of declines in June after surging in April. Nine of the 12 components declined compared to last month. The only material that saw an increase was a minor 3.6-points increase for ready-mix concrete. The two ocean freight categories saw significant jumps this month increasing from contractionary territory to readings comfortably over 70.0. Meanwhile, most other categories saw relatively modest declines of around 5.0- to 15.0-points. This includes all of the machinery and equipment categories which all softened this month compared to May. Shell and tube heat exchangers and pumps and compressors saw declines of 14.3-points and 12.5-points, respectively to each settle at neutral readings of 50.0 in June. The largest movers though were all the steel categories. Carbon steel pipe, alloy steel pipe and fabricated structural steel each declined at least 30.0-points this month with carbon steel pipe declining 47.2. These significant declines brought all the steel categories back to around 50.0 this month with carbon steel pipe at 41.7, alloy steel pipe at 50.0 and fabricated structural steel at 58.3 in June. These three categories alone drove almost all of the decline in the headline materials and equipment indicator for June.

“Steel prices will be mostly flat for the remainder of 2025,” said John Anton, Economics Director, S&P Global Market Intelligence. “Tariffs caused price hikes for almost all steel products early in the year. The recent rate increase from 25% to 50% added another dose, but it is now mostly priced in. Structurals remain so expensive that they are not expected to rise, but the declines are expected to halt at least temporarily.”

The sub-indicator for current subcontractor labor costs saw a fairly significant increase, rising to 81.3 after a reading of 71.4 last month. Increases were focused in the U.S. Northeast and West regions and both Eastern and Western Canada. All labor categories in these four regions increased this month. Both regions of the U.S. saw modest increases of around 15-points. Meanwhile, all categories in Canada grew by between 30.0- to 40.0-points. All contractor categories in the U.S. Midwest region saw modest declines while the U.S. South was virtually unchanged in June.

The six-month headline expectations for future construction costs indicator saw a minor decrease to 83.5 in June. The six-month expectations indicator for materials and equipment came in at 80.4, 2.6-points lower than last month’s figure. Six of 12 categories saw increases, though most were fairly minor. The largest increases came for transformers which jumped 11.1-points to 100.0. Only four categories saw declines—two were unchanged this month—but the declines were much larger on average than the increases. The largest declines were for the ocean freight categories from Asia and Europe to the U.S., which decreased 16.7- and 22.9-points, respectively.

Meanwhile, the six-month expectations indicator for sub-contractor labor saw little change this month. The U.S. Northeast and Midwest regions saw modest declines, while the U.S. South and Eastern Canada saw modest increases. All labor categories in the Western region for both countries were unchanged. Despite little movement, the reading remains very high at 90.6 in June.

Respondents reported no shortages this month. They did not expect continued tightness in Asia to U.S. spot freight rates as demand frontloading continues. Additional market comments noted that many projects are on hold due to tariff induced uncertainties.