PEP Review 81-3-1
Recent Trends in the PEP Plant Construction Cost Indices and Location
Published: May 1982
In the 70s the escalation in average plant construction costs (as measured by the PEP Cost Indices) has been somewhat higher than general inflation for both the United States and West Germany. The phenomenon is nterpreted in terms of "demand-pull" on equipment prices during surges in construction activity, and a lower than average productivity increase for plant construction.
As regards location factors, the key determinant has been the exchange rates. After an almost continuous weakening for a decade, the U.S. dollar regained strength in 1980. As a result, the plant cost location factors for both West Germany and Japan, which had climbed to well above unity in recent years, fell sharply. The fall was accentuated by plant cost escalation continuing at much higher levels in the United States than in either West Germany or Japan.
Some approximate location factors are presented for selected areas representing the newly emerging petrochemicals production centers.