Agility Rules Amid Uncertainty: Q1 Homebuilding Commodities Report

We cannot provide a commodity report for Q1 2025 without discussing tariffs.

Tariffs dominate pricing conversations across all sectors, affecting both finished goods and commodities used as raw materials in U.S. manufacturing. With many voices in the supply chain speculating about the potential impact of tariffs, there is still considerable uncertainty. The effects remain unknown even a month after new tariffs were imposed on most countries. For instance, LG, a supplier of kitchen appliances used by some homebuilders, recently stated,

We may need to increase prices due to tariffs if we cannot absorb them.” They are still evaluating the situation.

At first glance, one might assume that a 25% tariff would increase the price of a product by 25%. However, this is not necessarily the case. Sellers are trying to find the right balance between profit margin concessions and sales volume as they navigate what many believe to be temporary charges.

Navigating the multitude of opinions is challenging, with some asserting that prices will remain stable, others predicting significant increases, and some claiming a dire situation is on the horizon. We align more closely with the views of our trusted shipping brokers, who assist us in transporting building materials from the U.S. to Asian countries. Their insights, while credible, also come with uncertainty:

We think China will absorb half the tariff costs, the importer will take on one-quarter, and about one-quarter will be passed on to the consumer.”

At the ports of Los Angeles and Long Beach in California, traffic has decreased by 35%. It seems that buying from Asia has slowed down after a surge of pre-tariff panic buying. Buyers are attempting to create a lower cost-average by mixing their previous inventory with inventory procured under the new tariffs. Many may choose to delay new orders, hoping that existing inventory will last while waiting for tariff stabilization or finding alternative products at lower prices. Most U.S. companies have shifted from a just-in-time procurement model to a purchase-in-advance-of-need strategy, and the construction industry, which has historically maintained a 30-day inventory, is now well-stocked—anticipating that its current inventory will soon become low-cost in comparison to new orders.

The U.S. imports approximately 35% of its cement, with Canada and Mexico accounting for about one-third (7 million metric tons) of these imports. With the 25% tariff on cement imports from Canada and Mexico, we can expect an increase in cement prices—not only due to tariffs but also because U.S. suppliers might see an opportunity to raise their prices while remaining slightly below imported products. The question remains: Will the current administration make it easier to build cement plants in the U.S.? Heavy regulation has historically hindered past attempts.

Quarterly Highlights

Aluminum Wire

Aluminum wire has typically had stable pricing, changing only once every year or two. However, this is no longer the case. This wire, primarily used for delivering current to the breaker panel, has increased in price twice in February and twice in March. These price hikes did not coincide with tariffs. Currently, aluminum wire prices are up 35% for Q1 and have surged 935% since 2019.

Copper Wire

Copper wire prices continue to be the most volatile of all construction materials. There are times when raw copper commodities follow a similar pricing trend as copper wire, and other times when they do not. Like now. Currently, copper wire is up 78% in Q1 and has risen 781% since 2019. However, it’s worth noting that Southwire has dropped copper wire prices by 73% in April, which could cause concern for those with significant stockpiles. If this year follows last year’s trend, Southwire may gradually increase prices each month. For those considering stockpiling wire, now may be the time to act.

Wall Insulation

Typically stable throughout the year, wall insulation prices have increased by 11% this quarter. This represents a significant single jump for this category. We are not sure what is happening here—let us know if you have insights.

Cement and Ready-Mix

Cement prices appear stable this quarter, but as mentioned earlier, they are expected to rise.

Acrylic Resins

Acrylic resin prices have increased by 8% this quarter, but we anticipate further increases as tensions build in this category. Acrylic resins are used in a variety of products, including vinyl windows, carpets, plastic pipes (PVC, ABS, PEX), cultured marble, housewrap, paint, exterior insulation, acrylic stucco, vinyl fencing, and anything requiring adhesive (such as plywood, wood flooring, and laminated beams).

Looking Around the Next Corner

I don’t recall a time with less pricing stability than we have now. I empathize with the purchasing managers who are forced to guess where prices will settle. As a result, they are pressuring their suppliers to make similar predictions just to have something to report. The reality is—nobody knows.

Albertsons, with over 2,200 grocery stores, has warned its suppliers that it will not accept price increases related to tariffs. It’s a bold move. Will it be effective? If a homebuilder attempts a similar strategy, could it backfire? Is it worth trying, even if it leads to negative repercussions?

This is a challenging time to be a purchasing manager. Hang in there; a lot is likely to happen in Q2. Agile supply chains will be in the best position to adapt.