Steel price rises turn screw on fixed price jobs

Aaron Morby 14 years ago

Concrete and steel frame contractors are being pushed to the brink by sudden rises in steelwork and rebar prices.

Concrete firms started to feel the squeeze first as rebar prices shot up from around £365 per tonne at the start of the year to around £500 a tonne today.

But now steelwork fabricators have warned they are being slapped with price hikes from major suppliers like Corus.

A deeply concerned steelwork contractor said: “Usually a strong orderbook is something to boast about. At the moment it is a liability because we are all stuck on fixed prices and raw materials seem to be rising daily.

“Smaller firms are going to buckle under this pressure.”

Concrete specialist are also having a tough time. A leading London firm said: “Rebar prices are incredibly volatile.

“Rebar  engineers are bent on doing anything to get out of contracts because they know they will make more money somewhere else.”

A spokesman for leading rebar fabricator Kierbeck, said: “The truth is the price of scrap has gone mad. Fabricated has jumped from around £300 last year to £550-£600 today.

“Nobody knows where it is going next.”

Steelwork contractors are braced for more rises in May and June after a jump in prices in March.

Prices from steel makers will have increased by around £190 per tonne for the first half of 2010 once rises announced so far take effect. A £50 a tonne rise in March was followed by a £60 per tonne rise to take effect in May.

A spokesman for the British Constructional Steelwork Association said: “We anticipate that there will be a further increase of £80 per tonne in June.

“That means prices will have risen by some £190 per tonne in the first half of 2010.”

The price increases are being driven by rapidly rising input costs for iron ore, typically 100%, and coking coal, typically 70%, due to heavy demand for steel in China and India.

BCSA director Derek Tordoff said: “Until now we have seen some projects hold back on placing orders because as the weeks crept by prices got lower.

“With more steel price rises are on the way it is time clients act quickly to secure advantageous prices for building frames and other structural steel applications.”

Steelwork contractors have seen a 40% fall off in demand in the last 18 months. And the industry has dramatically cut capacity.

But cost consultant Davis Langdon said it expected some of the steel price jumps to be absorbed in the supply side.

In its April Iron Ore and Steel Cost Briefing,  it said: “The concern is that cost inflation will lead to a sharp increase in steel prices, impacting on the viability of construction projects at a time when the market is just stabilising.

“There remains plenty of capacity in the steel market which will, to some extent, constrain the ability of stockholders and sub-contractors to fully pass on the cost increases sought by steel makers.”

Mike Putnam, the UK boss of Skanska, said: “While the commercial market was dead last year, there are signs that it is coming back and this is bound to have an impact on that process.”

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