Builder materials suppliers are recording sharp profit losses amid the residential construction downturn, reported CNNMoney.com.
The Dow Jones U.S. Building Materials index fell 18 percent over the past year. In January, the index fell below 300 for the first time since mid-2006. In December 2007, construction spending dropped 1.1 percent, the most in 15 months. With fewer construction projects up for bid, contractors have to cut costs to remain competitive. But costs for metal and wood are rising.
Louisiana-Pacific Corp. said the weakening dollar increased the costs for lumber it buys in Canada, and demand for its products fell sharply, leading to a wider fourth-quarter loss.
“It will be a very tough year for anyone in the building products business and the new residential construction business,” said CEO Rick Frost.
The news is also bad for USG Corp., a wallboard maker. One analyst said wallboard use is expected to fall by 68 percent in 2008. That would be the biggest decline than any time during the past two housing recessions in 1991 and 1982.