Rising steel costs shape building prices

Steel costs more internationally because China is consuming more, buying for future

Posted: Wednesday, July 28, 2004

North Pacific Erectors in Juneau got hit with an extra $10,000 bill for the construction of a rental commercial building near Lemon Creek because of the fast-rising price of steel, President Jim Williams said Tuesday.

North Pacific Erectors constructs buildings from pre-fabricated steel.

Williams thought the steel portion of the building would cost $90,000, but then found out the price would be $100,000. He bought materials ahead of time on two other projects to lock in current prices, saving $30,000 to $40,000, he said.

North Pacific is one of many companies that has had to pay more to build because of skyrocketing steel prices that began to shake up world markets over the winter.

"No one knew these prices were coming nor did they know they would be as fast as they came," Williams said.

Steel prices are rising most notably because China is buying materials for the 2008 Olympics in Beijing and its own internal consumption, city architect Rod Wilson said.

A coal mine fire in West Virginia in 2003 led to lower U.S. output of coke, a substance made from coal that is used in making steel. The U.S. dollar, which has been falling for months, is making imports costlier, including steel.

Steel prices have gone up by 40 percent since January, said Roxanna Horschel, owner of Acme Fence in Anchorage.

The market price of hot-rolled steel sheet more than doubled in the second quarter of this year to an average of $601 a ton from $267 a year earlier, according to a Bloomberg.com report published Tuesday. It rose 42 percent from the first quarter's per-ton price of $423. It soared to a record $627 a ton in June.

The delay of Bartlett Regional Hospital's new wing and a second high school may have been to the benefit of local taxpayers, architect Wilson said. If steel prices decline this fall and into next year, it may play favorably with any new high school building that is approved, he said.

The engineer's estimate on the $24 million Bartlett project went up by $836,000 from March 2003 to March 2004 because of higher steel prices, Wilson said.

Coogan Construction of Juneau, the low bidder on the Bartlett project, factored in higher steel prices and could end up paying more only if the project is somehow delayed by about 90 days, owner Wayne Coogan said.

Horschel wasn't able to factor in higher steel prices. She had six outstanding state bridge projects when steel prices began climbing last November. Her company was installing guard rail and bridge rail in the projects. Acme installed the steel fence along Mendenhall Loop Road in Juneau a couple of years ago.

"I'm basically donating the material to the state of Alaska," Horschel said. "I'm very, very disappointed in the leaders of our state that they left the contractors out to hang like this."

The state does not have contractual clauses that account for price fluctuations, she said.

Horschel, also president of Associated General Contractors of Alaska, is planning to meet with state Department of Transportation officials to discuss allowing price swing clauses. The clauses would be in contracts between the state and members of AGC, a statewide trade group. No meeting date has been set.

DOT officials could not be reached for comment by press time.

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