June 12, 2009
Steel prices, project activity reflect cooled-down market
The current state of steel prices can be summed up in three words: It’s a steal.
The global recession and credit crunch has cooled the red hot prices structural steel, rebar and other construction-related products experienced this time last year, but industry insiders say they have an uneasy feeling things are about to explode again.
When steel hit peak prices in July and August last year, right before the September financial market meltdown, scrap was fetching around US$700 a ton; today it’s around US$300 if you can find buyers.
Most steel makers have stopped buying scrap, which is piled high in inventory in scrap yards across the country. Demolition companies are also sitting on recovered metals with few buyers.
This time last year steel fabricators were offering quotes on I-beams and other structural steel components good for a day or few days only; today they’re more than eager to offer firm pricing because demand has dropped dramatically.
John G. Brasil, President and COO of Etobicoke Iron Works says things have changed dramatically but there’s a feeling it could just as easily pick up just as quickly.
“There’s lots of contractors bidding on the jobs and getting prices but it’s not translating into orders just yet,” he says.
Most of the orders moving now are for steel required for finishing of projects and what’s worrisome is that there aren’t a lot of orders for materials required for starting a construction project, he says.
The consensus in the industry is that there’s going to be a further lull at least for the summer but that there’s expectation that pent-up demand, public infrastructure projects, the restoration of normal credit conditions and the glimmer of a recovery could start to heat things up again by fall.
However, given the ills of the auto manufacturing sector, it will require a surge there too before the pressure really starts to build on steel prices. But that too could shift into high gear quickly if consumers regain confidence and automakers start producing vehicles more attuned to market demand.
“Of course, we’re saying the fall, six months — that’s because that’s as far as anyone can see and that’s what we hope for,” Brasil says, tempering his own forecast.
Similar expectation that global stimulus packages will reignite moribund metals demand has been driving prices on world markets. Copper jumped 46 per cent this year on such speculation, for example, but has more recently started to fall back. Nickel was also falling by mid-May as demand for stainless steel continued to soften.
Still, all eyes are on China as the best bet to pull the world economy back on track. While the world’s largest consumer of metals has slowed spending, it is still expected to see a 6.5 per cent growth in its economy and has continued to buy steel and other metal commodities to stockpile, taking advantage of the current prices.
Sam Costa, president of C&T Reinforcing Steel Co in Scarborough, Ont. also has a feeling a resurgence is around the corner.
“A lot of inquiries about prices for bids but not a lot of work resulting,” he says.
Rebar prices hit US$1,041 last summer but have fallen to about US$600 a tonne in North America.
Still, it’s business as usual for the engineers who aren’t too upset about the glut of product available.
“I never really got to upset about it last year either,” laughs Dave Tipler, a board member of the Consulting Engineers of Ontario and a structural engineer at Bannerjee and Associates. “Of course, I’m not a contractor. I just specify the materials but don’t have to find it or pay for it.”
Still, he says, there aren’t adjustments many adjustments being made because certain materials aren’t available and no panic phone calls from contractors pulling their hair out over prices and delivery schedules.
And for structural steel contractors like M&G Steel in Oakville, there’s some hope that work will pick up soon.
“Certainly we’re tracking which contracts are getting awarded,” says Mel Grime, one of the founding partners, “Not just the ones we win or don’t get but there are also contracts that don’t seem to get awarded.”
That, he says, is curious and could be the result of the tight credit market and owners not being able to get financing or something else all together.
“Still, if you got the balls and the money, it’s a great time to build,” says Grimes. “The prices are really good.”
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