Steel prices decreasing this year

It’s been a year since groundbreaking, but Gilbane Building Company has finally started work on a $40.5 million Phoenix crime lab it bid on in 1999. The delay was due to 2004 spikes in steel prices and concrete availability – the main materials needed – and were the reason the company’s bid was $10 million over budget.

Although some contractors are still crippled by the steel price increase, costs are down about $100 per ton. According to the American Institute of Steel Construction, structural steel prices dropped by 20 percent – from $618 per ton to $510 – since the beginning of the year, mainly because of lower scrap costs. Prices for steel products increased an average of 40 percent in 2004.

Scott Melnick, vice president of communications for the American Institute of Steel Construction, said 1 million tons of structural steel is currently in inventory nationwide.

Fred Warner, investor relations manager for Steel Dynamics, said prices went up due to economic conditions and product demands. From a historical standpoint, he said, prices for hot roll and hot band steel had averaged $300 since the early 1990s.

“Now they are in the mid $400s,” Warner said. “There were times that it was difficult for consumers to get steel on schedule because we did not have the productive capability domestically to satisfy the demand, but people who wanted it were willing to pay more for it. That’s when imports became much more attractive.”

In December 2003 the Bush administration lifted tariffs it had placed on imported steel.

But Ken Simonson, chief economist for the Associated General Contractors of America, said contractors are still feeling the blow from 2004. While prices for steel building materials have dropped, they haven’t returned to 2003 levels.

“Prices have not dropped as much for construction steel as for automotive or appliance makers, because construction is still expanding,” Simonson said.

Some contractors had not seen prices increase as rapidly as they did in 2004 since 1973 and 1974, he continued.

Some government agencies didn’t incorporate the additional material costs in project bids, and as a result many contracts that should have been closed remained open for continuous bidding. In Louisiana, the lowest bidder on Louisiana Highway 1 renovations bid $98 million over the budget, something the Louisiana Department of Transportation and Development won’t allow. Departmental statements said LDOTD was upset about the bid and would reopen it nationally and redesign a bridge in hopes of getting a bid closer to the $153 million range it budgeted for.

Danny Hester, senior vice president for low bidder James Construction Group, said there was no way the department of transportation took the high steel prices into consideration. “Our permanent materials alone cost as much as the state budgeted,” he said. “We bid based on the state’s design – we’re excited about the steel prices going down, but we’re still seeing high prices.”

Ron Johnson, steel purchaser for Chief Buildings, said his company is glad prices have eased a little even though they aren’t near the “norm” of the beginning of the millennium.

“It’s a silly question as to whether or not the prices are going to stay the same, though, because steel prices are always going up and down.”

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