The Future of Cement is 3D
What You Should Know About New Energy Changes
Future of Equipment Tracking for Construction
Sydney's Taronga Zoo Sets the Benchmark
Harnessing Solar Energy With Eyes in the Sky
Infrastructure Priority List Identifies $58 Bn Project Pipeline
New Projects Bring Economic Growth to The Whitsundays
Building Approvals Hit 5-Year Low
By Laura Moretz
June 18, 2018
Construction costs increased for the nineteenth straight month in May, according to an IHS Markit report of the Procurement Executives Group for the Engineering and Construction Industry. Material costs have been increasing each month for 18 months. As the report claims, material costs in all 12 categories increased 1.7 points from 65.7 in April to 67.4 in May.
The report says that “the three steel categories—fabricated structural steel, carbon steel pipe, and alloy steel pipe—moved even higher in May, indicating that steel price increases are being widely felt.” Concrete prices also pushed higher in May, up 3.6 points to 61.1.
The report also tracks expected costs six months in the future. By this measure, forecasted increases for material and equipment continued for the 21st straight month, with an increase of 4.9 from the April report.
The Section 232 tariffs of 10 percent for aluminum and 25 percent for steel went into effect for Canada and Mexico on May 31. As the U.S. receives 25 percent of its steel and aluminum imports from these countries, the uncertainty surrounding this trade dispute is expected to continue to increase the cost of U.S. building projects.
“Steel and aluminum industry impacts will be sizeable. Prices will rise substantially—but not by the full amount of the tariff. However, even before 232 was enacted, fear had driven current U.S. steel prices well above European levels,” noted the IHS Markit report.
Steel supply tightened in late 2017 as disruptions hit production in Europe, according to IHS Markit. “Buyers in the United States faced higher prices for imports that necessitated redrawing some supply chains and then further disruption from the Section 232 tariffs.”
The U.S. is the world’s largest importer of steel. Archinect says the U.S. imported “35 million metric tons in 2017, which accounted for 33 percent of the total steel used in the country.”
Archinect’s analysis reports that “the single biggest impact will be on structural steel in steel framed buildings.”
The 232 tariffs on imported steel and aluminum are intended to restore lost manufacturing jobs in the U.S. Nevertheless, it will be a struggle to ramp up U.S. steel production quickly. Archinect News quoted Michelle Applebaum, a steel industry analyst, saying, “the U.S. steel industry should be able to meet most demand, but even plants like Granite City and Ashland, which have been kept ready to restart, take four to six months to be ready for production.” It also takes time for builders who have relied on foreign steel to find new suppliers.
According to Reuters, the fact that some steel products are not made in the U.S. will lead to layoffs in the construction industry. For example, at Plains All American Pipeline, CEO Greg Armstrong said shortages could interrupt projects that rely on pipes and valves not manufactured in the U.S.
While the full effect of the steel and aluminum tariffs is uncertain, the increased cost of imported steel may not be significant for every project. Nick Butcher, the Managing Director of MGAC’s Cost/Risk Group, gave the following example, published in Archinect News:
Example I - A new 100,000 GSF academic building with a structural steel frame of 15 lbs/sf located in the Mid-Atlantic Region:
Total cost of building at $350/sf: $350/sf x 100,000 sf = $35M
Total quantity of structural steel in the building: 15 lbs/sf x 100,000 sf = 1.5M lbs (750 tn)
Cost of raw steel = $800/tn
Cost of structural steel (including raw steel costs): $4,000/tn*
Total cost of structural steel in the building: 750 tn x $4,000/tn = $3M (9% of total building cost)
Apply 25% tariff to the raw steel portion of the structural steel only:
Total cost increase due to tariff: 25% x $800/tn x 750 tn = $150,000 (0.43% of total building cost)
In this and other examples, the increased cost of steel would add 1 percent to the building’s construction cost.
EU Braces for US to go Ahead with Steel and Aluminum Tariffs
The AEC industry relies on drawings for everything, from the external site plan and interior layout to the punch list and RFIs. According to Home Improvement Pages, a custom-designed residential ho... Read More
Construction work as we well know is a team effort, requiring the synchronization of workers, equipment and materials. And just as construction wo... Read More
Listen in to this free webinar with Carey Larsen, Social Marketing Manager at Procore, Bob Gardner, CEO of Gardner Builders, and Jessica Stoe, Bran... Read More
At a rural Ohio job site, Wieland Construction and its subcontractors are managing progress entirely from mobile devices — an investment they say h... Read More
The majority of project leaders and teams on site today still utilize outdated, manual tools and processes—even though there are plenty of technolo... Read More
If only smooth and easy client communications was a project tool you could pull out and use at a moment’s notice. Unfortunately, that’s hardly the ... Read More
The big deal is the cash-burning time sink created by a hazily written RFI. It’s already been shown that about 22% of RFIs never get answered at al... Read More
December 31, 2018