August 8, 2008

Construction industry steels against rising rebar prices

IAN HARVEY

correspondent

Like all building materials, rebar has seen unprecedented price increases in the last year, but don’t look for anyone to start making predictions as to whether the trend will continue.

Steel prices generally are being driven by demand for construction materials as China, India and Russia ramp building of infrastructure and productive capacity.

That in turn has prompted a stampede to secure steady supplies of scrap steel, the cost of which is now approaching what producers used to pay for virgin steel, says Sam Costa, president of C&T Reinforcing Steel Co. in Scarborough.

“The demand is so high that Turkey is paying top dollar to bring in boatloads of scrap from North America,” he said, adding that, over the last year, North American rebar prices have approached the generally higher prices in Europe and Asia.

“We’ve seen an 81 per cent increase since last January.”

Jeannine Murphy of RS Means, which tracks costing for ICI projects in the U.S. and Canada, says rebar took a big jump between the first and second quarters this year, up 31 per cent. Since then the increase has been about two per cent.

Based on a 30-city average in the U.S., she says, rebar started the year at about US$47.37 per hundred pounds and went to $62 per hundred pounds the second quarter.

The pressure on steel prices may ease as the peak seasonal construction demand passes this year.

American Metal Markets Web site recently reported that Turkish rebar makers have backed off their pricing by $40 a tonne after buyers balked at price increases earlier this summer.

Russian and Ukrainian rebar suppliers were also reported by AMM to have limited exports to concentrate on domestic demand, at least in part because of stalled interest.

In North America however, prices generally are still rising, with demand still strong.

“It’s really still a supply and demand thing more than anything,” says Costa. “We’re catching up to the rest of the world in prices.”

Buying raw materials in larger volumes to stockpile and protect customers from short-term price increases isn’t practical, says Costa.

“You have 20 towers going up and that’s a lot of steel — you just can’t sit on that,” he says though he’s sympathetic with customers who are feeling the pinch from the spread between prices when bids were made and current prices.

Geoff Kinney knows that squeeze play all too well. The executive director of the Concrete Floor Contractors Association of Ontario says rebar prices are on top of the list when it comes to conversations with his membership.

But there’s not much contractors can do but grin and bear it, he says noting commodity prices generally have risen quickly over the last year and steel is no exception.

Alternative technologies to rebar simply can’t be substituted without rethinking and reengineering designs, he says, so we’re stuck with steel.

Pricing meanwhile, is “like pinning jelly to the wall” he says with quotes seemingly changing daily.

“Everyone is stuck in the middle,” he says, with contracts now including price-escalation clauses in their bids to cover themselves.

“We shouldn’t have to pay the increases — the building owner should.”

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