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How the price of steel material affects the building boom

The construction industry in North Carolina has suffered a higher cost impact-and is supporting them as they continue to move higher-as steel and aluminium suppliers respond to Donald Trump's executive orders on tariffs on these imports.


"Steel materials are ubiquitous in architecture," said David Simpson, Carolina's AGC president of the Construction trade association. "It is used for concrete, bridges, beams, staircases, interior walls and hardware."


On March 8, Trump imposed a 25% tariff on imported steel and 10% on aluminium. The president has said higher tariffs are needed to avoid further weakness in US domestic steel-processing materials and may face the risk of steel shortages in national emergencies.


Despite Trump's orders to exempt steel imports from Canada and Mexico, last year North Carolina State only imported 30 million of dollars of steel from the two countries. According to the U.S. Department of Commerce data. Most of the $150 million of steel imported into the state comes from Brazil, with steel imports exceeding 52 million dollars. Brazil is now one of the provisional exempt countries-until May 1.


After Trump signed the order, the construction company was hit by rising prices, not only from foreign steel makers.


March 9, Nucor in Charlotte raised its price by 45 dollars per ton of steel. Bill Pruden, president of the Steel technology company, is the contractor for Rocky Mount, one of the affected clients. Pruden said he saw an increase of 5% overnight. Prices have risen 26.8% per cent over the past three months as steelmakers expect tariffs.


Since steel is a major component of the overall project price, a relatively small change in steel prices could have a significant impact on the total cost of the project and make the developers ' margins too small to move forward, Raleigh developer Greg Sandreuter.


"Assuming that steel material is a 10% of construction costs," Sandreuter said, his property includes the Skyhouse luxury apartment building located in the heart of Raleigh. "Then, the total construction cost of 10% increased by 25%, accounting for the total project cost of 2.5%." This may cause the transaction to be ineffective. “


Assuming that steel prices are relatively stable, developers often spend years planning specific construction projects. But the recent producers, "will not guarantee these prices, but three days," Pruden said.


Chuck Pinnix, sales director at Graham Buckner Steel Erection, says the current messy price hike will allow developers to redesign projects to keep their budgets unchanged.


"What we might see is some static items," Pinnix said. He predicts it will last for six months to a year.


If the tariffs remain unchanged for a long time, Pinnix says construction projects will continue to be more expensive and homeowners will have to charge higher rates for tenants.


Simpson and Carolanas AGC said his organization expects more price hikes. "The proposed increase may produce a sound political voice, but we are very concerned about how it will increase the price of imported and domestically produced steel in the construction industry," Simpson said. ”


Although Nucor did not address the issue of e-mail questions about future price increases, Charlotte spokeswoman Catherine Miller said: "The proposed tariffs are important for the long-term financial position of the steel industry." We support the president's message to foreign competitors that artificially dumping cheap steel products into our markets will no longer be tolerated. “


Pruden predicts that future construction customers will choose wood or other steel substitutes. Steel and steel contractors will lose their market share. "The amount of work we might sell will fall," he said.


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