Worries grow over steel supply
April 19, 2004
Already attempting to overcome the effects of sharply higher wholesale prices, Mario Bullentini now worries that his Martin Iron Works may not be able to meet the construction demand for steel this summer.
Worse yet, he sees signs that surety companies won’t write bonds for steel subcontractors because they’re afraid that the steel suppliers will simply walk away from unprofitable jobs.
And that, he says, would bring to a halt many public construction projects in fastgrowing northern Nevada.
Prices for some steel products used in construction have risen by as much as 60 percent since the start of the year, and mills have added surcharges up to $162 a ton when some products are delivered.
In fact, the Associated General Contractors of America says the price of steel increased more in the last three months than the previous 30 years.
The major culprit? Industrial growth in China, which is buying all the scrap it can to fuel its steel mills.
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Steel suppliers that won jobs in Nevada early this year traditionally a busy season as the summer’s work is bid now find themselves committed to deliver materials for much lower prices than they’ll pay on the wholesale market.
Organizations with building projects on the books are scrambling.
Daniel Gonda, who works as the owner’s representative on construction projects for Saint Mary’s Health Network, hopes to order steel five months in advance of the start of construction on an expanded emergency room.
Gonda acknowledges that he’s speculating on steel prices – “It’s like buying a stock,” he says but he doesn’t think prices are headed down any time soon.
Roger Van Alyne, director of the capital projects division of Washoe County, says that three bids opened by the county in the past month all were 20 to 40 percent over estimates largely because of higher prices for steel.
“This makes it difficult to create a reasonable estimate that can be used to adequately fund a project,” he says.
A spokesman for the Nevada Department of Highways, whose contractors are using tons of steel in projects ranging from Reno’s Spaghetti Bowl to Carson City’s bypass, says state highway officials are keeping a close eye on the situation.
Bullentini, vice president of Martin Iron Works, says sharp increases in price soon may be a secondary worry.
The mills that supply his Reno-based company say that they’ll begin allocating supplies this summer, and some orders won’t be filled.
That, he says, threatens to dramatically slow or even stop major construction projects.
“If the structure of the building can’t go up, nobody else works,” Bullentini says.
Steel supplies aren’t a major concern to Granite Construction Co.
on its project to build a train trench through downtown Reno.
“As long as we can maintain our schedule and get the steel when we need it, that’s our main concern,” says train-trench spokesman Dante Pistone.
“We don’t see it as a major problem.”
Even if supplies are available, steel suppliers look to protect themselves from further price increases.
It’s common these days, Bullentini says, for steel bids to carry a note that they’re good for only 10 days five days in some instances rather than the 30 or 60 days of the past.
Some steel companies simply decline to bid jobs that they view as high risk.
And increasingly, Martin Iron Works and other subcontractors want escalator clauses in contracts.
That’s a reasonable request, says Derek Morse, deputy executive director of the Regional Transportation District.
The alternative, Morse says, is bids that are high because contractors build in cushion to protect themselves.
Bullentini and others from the construction industry met last week with Gov.
Kenny Guinn and Congressional representatives from the state to update them on the situation.