Steel Pricing NASCC - AISC

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No! A blanket statement like that has no credibility in the marketplace. <strong>AISC</strong> cannot and doesnot speak for the price of concrete systems just as we hope the concrete industry does not attemptto speak to the price of steel solutions. The message that you and I need to send to owners,architects and general contractors is that if they are reevaluating their projects, they must do socarefully comparing not old prices to new prices, but the current costs on a project level foralternative systems. And to do that it is wise to involve a fabricator, a steel specialty contractor,early in the process for the most accurate information and value generating suggestions.Our conclusion – steel has been and will continue to the most economical framing systemavailable for most projects when looked at from a project wide perspective.The second concern we need to address is “What is the impact of the current volatility on theavailability of structural steel for my project?”Structural steel is in abundant supply from both mills and steel service centers. Domesticdemand for wide flange members in 2004 is projected to be 3.6 million tons against a domesticcapacity of 6 million tons. The construction market in the United States could grow by over 25%and wide flange structural shape would still be readily available. Hear me clearly – the presentvolatility in the market place is not a statement of lack of availability – structural steel is readilyavailable.<strong>Steel</strong> for a project will come from one of two sources – a mill or a service center. An orderplaced by a fabricator for steel that comes directly from a mill is filled either out of inventory orproduced according to a rolling schedule for various shapes. Typically a full rolling scheduleproducing all required shapes takes 6 to 8 weeks to complete. If the demand for a particularshape is high and all of the available tonnage in a given rolling cycle for that shape is reserved,the mills will typically extend the scheduled rolling of that shape in the next cycle to balancesupply and demand.However, it is not necessary to wait until the next time a specific shape is rolled to obtain steel.Service Centers throughout the country stock over one million tons of structural steel for rapiddelivery to your selected fabricator.Hasn’t scrap demand created a shortage of scrap and cut back in structural steel production. No!Domestic mills do not have a shortage of scrap – the cost has risen sharply, but scrap is stillavailable and mill rollings have not been limited.What does that mean to the general contractor, architect or owner?Our conclusion – structural steel is readily available. In fact, the current supply capacity ofstructural steel can absorb a 25% increase in the construction market with no disruption ofsupply.The third concern, “How can you help me navigate any surprises that await me as I moveforward on my project?”This is the question we have been waiting years for owners, general contractors and architects toask. Do you understand that they are asking us, steel professionals, for help? For our expertise?4
For our guidance? That they are looking at us not as a commodity subcontractor, but as a steelspecialty contractor that can bring value into their project?This question is our opportunity to demonstrate the expertise and value a steel professional canbring to a project team.We were asked recently by the Associated General Contractors to answer that question. Weoutlined seven points a general contractor needs to keep in mind. Allow me to share those pointswith you as we presented them…First, recognize today’s situation as an opportunity to develop a better understanding of thespecialty contractor process, particularly that of a steel fabricator. What we all learn in thesevolatile times will serve us well in increasing both your profitability and that of the fabricatorwhen stability returns.Second, recognize that during a period of price volatility for any type of product, the shorter theamount of time between accepting bids, selection notification and authorization to proceed thebetter. If you want a fabricator to lock price on a project, be prepared to hear from the fabricatorthat they will need to turn the project from bid submission to mill or service center order in aperiod of days, not weeks or months.Third, make sure that both you and your bidding subcontractors are approaching the globalmarket volatility on a realistic basis. Some fabricators may suggest including "price adjustment"clauses in their contracts. Whether such clauses should be used on individual contracts is anindividual decision that needs to be made on a job-by-job and company-by-company basis. Ifyou decide to use such clauses they should be structured to be as accurate and as fair to allconcerned as possible.Fourth, on existing contracts be aware that there is discussion at the specialty contractor level toseek recovery of unforeseen cost escalations such as surcharges. This is not just an issue withrespect to the structural steel package, but we have heard similar desires from the plumbing,HVAC, concrete and electrical industries. It is clear that these were unforeseen increases thathave created performance difficulties under existing contracts. It would seem prudent to sitdown and discuss the issue of price escalation with both the project owner and the affectedspecialty contractors at the table to come to a workable solution. This is an internationalproblem that has resulted in price displacements throughout the construction industry. It is notreasonable to anticipate that the specialty contractors should bear this burden alone.Fifth, move away from evaluating pricing on a per ton basis. Evaluate the steel package incomparison to other materials on a per square foot basis and, better yet, make sure you comparesystems based on their impact on total project cost including the overall construction package,accelerated schedule savings in general conditions, soft cost savings from early occupancy andlife cycle cost reductions.But in terms of future projects during this time of volatility and beyond, I would like to suggest asixth consideration. I would recommend that you consider integrating specialty contractors andparticularly a certified steel fabricator early into the project team. Fabricators monitor steelpricing on a continuous basis and can recommend value engineering. Design can be directlyinfluenced to take into account fabrication and erection efficiencies. Fabricators can also5
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