August 4, 2008

Letter to the Editor: Large users have options in keeping steel costs down

Having read your article (“Rising prices for steel, asphalt, diesel are tough on contractors,” DJC July 18) your story does not properly cover the price increases in steel and how the steel industry is dealing with them.

Projects that require larger tonnages, say 300 tons of wide flange structural shapes, and use the large structural steel fabricators may have more options. With large projects wide flange structural steel can be purchased from the mill and with mill orders steel prices can be held constant for up to 180 days.

The fabricator that does small projects and buys from the steel warehouses is subjected to the pricing changes as described in your article, but not with 10 to 30 percent moves.

The steel pricing is affected by the value of the dollar and the demand for scrap metal by mills in places like Turkey. The foreign mills can come to the U. S. and buy scrap at bargain prices because of the drop in the value of the dollar. Of course the cost of energy is a big player as well. Foreign steel has not been sold in the United States for quite a while with the exception of “jumbo” shapes, beams over 398 pounds per foot, that come to us from Belgium. These heavy beams are subject to pricing at the time of rolling. The demand overseas affects prices at the scrap metal level.

The problem with steel prices can be controlled in the wide flange sector. Prices for plate, flat bar, angle iron, channel and studs cannot be controlled. We pay the price at the time of the rolling. This can be up $65 to $300 per ton over two months in this current market place. These items can affect the cost of up to 30 percent of the steel portion of a project, but certainly not the whole project. The decking suppliers are providing fixed pricing out eight months provided that the orders are placed within 30 days of their quotations.

Steel is not a soft metal. Copper and aluminum may be more volatile than the steel industry. We do not deal with those commodities here.

I only write this so that the developers do not react to your writing negatively and put their projects on hold. We have enough problems in the market place without articles that do not cover the whole picture.

Rick LeDoux

Fought & Co.

The Daily Journal of Commerce welcomes your comments.

• E-mail: editor@djc.com
  
  

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