ACHRNEWS

Steel Prices Skyrocket

December 22, 2004
There was no shortage of manufacturers submitting price increases to The News for publication in 2004. The main reason cited for the cost hikes was the drastic jump in steel prices.

The steel market was affected by a variety of factors. In December 2003, President Bush repealed tariffs on imported steel. Mill consolidations and a booming economy in China limited supplies. A shortage of coke, a necessary material for steel production, and a shortage of scrap metal, also used for steel production, contributed to the limited steel supply.

The shortage caused steel prices to skyrocket, creating an industry-wide chain reaction. Higher prices were passed down to contractors, who in turn were forced to decide whether to pass the costs on to customers.

An undersupplied world market and mill consolidations contributed to rising steel costs, leading some contractors to consider reopening bids on some projects.
"In Pittsburgh, contractors reported having problems purchasing steel in February 2004," noted Tom Soles Jr., executive director of the Sheet Metal and Air Conditioning Contractors' National Association (SMACNA). "They indicated that prices for various steel products had gone through the roof ... and many suppliers were telling those contractors that they can guarantee only 50 percent of the total order."

Some associations took action. SMACNA, along with its alliance partners the National Electrical Contractors Association (NECA) and the Mechanical Contractors Association of America (MCAA), worked to get congressional and administrative attention on the issue.

Organizations such as SMACNA and MCAA worked to focus congressional and administrative attention on the volatile steel market. SMACNA’s legal counsel has drafted suggested guidelines for assessing how a firm might be affected by this issue, noting that certain clauses in contracts could help protect a contractor if steel became unavailable.
The Gas Appliance Manufacturers Association (GAMA) joined the Emergency Steel Scrap Coalition, a Washington-based group comprised of industry associations and steel-consuming companies that hoped to convince government officials to help remedy the steel situation.

Economists predict the soaring price of steel will gradually come back down, but it's expected to be a long, slow decline. At the National Association of Home Builders (NAHB) Construction Forecast Conference, an economist predicted that price levels at the end of next year are still going to be comparatively high.

Publication date: 12/27/2004