The construction industry is still being hit with high steel prices.



Fenton, Mo.-based American Metals Supply Co. has stocked up on steel in an effort to cope with increasing prices.
While some sectors of the U.S. economy are recovering from recession, the construction industry is still being hit with higher prices for raw materials, especially steel.

It's affecting all sectors of the sheet metal industry. Here is a look at how some contractors and suppliers are coping.

Leonard Charland, owner of Sheetmetal Specialist Inc. in South Burlington, Vt., uses up to 30,000 pounds of sheet metal every month. Charland said he remembers when his supplier would guarantee its prices for three months. Now the supplier prices each load individually, he says. Prices have doubled in the last few months, and Charland worries that steel won't be available when he needs it.

Perhaps that's why Jim Frontz of Quality Sheet Metal always keeps an extra $35,000 worth of steel in stock at his Tucson, Ariz., shop. The company will be moving into a new building soon, and Frontz says he needs the storage space. Unlike Charland, Frontz uses four different sheet metal suppliers, because prices can vary by up to 75 cents a sheet.

With prices fluctuating, Frontz says he tries to guarantee his quotes for two weeks, but acknowledges if his costs go up, he tells customers and adds it to their invoices.

The price hikes are too much for some builders: Investors are pulling out of some Tucson-area projects because they are over budget, he adds.

In the Kansas City, Mo., area, some builders are asking contractors to buy materials now for jobs they won't start working on for two or three months, according to Rob Myers, vice president of Belton, Mo.-based Myers Furnace Co.

That can make storage difficult, he says, in addition to all the other difficulties sheet metal contractors are facing now.

"Couple gas prices with steel prices (and) with an increase in interest rates, and it's really going to hit us hard," Myers says.

The reasons for the steel price hikes are threefold, according to Chrissy Nardini, chief financial officer with American Metals Supply Co., a Fenton, Mo.-based supplier of sheets, coils, duct and fittings. Nardini estimates her company has experienced a doubling of sheet and coil prices and a 25 percent hike in duct and fittings since December.

Nardini says the higher prices are due to:

  • A lot of steel is being exported to China, because the country is not producing enough to satisfy its manufacturing needs.

  • There is a shortage of metallurgical coke, a material required to manufacture sheet metal (a recent fire in a West Virginia coke mine has limited the resource).

  • There is a scrap-metal shortage, also due to heavy exports.

    Although Nardini says availability is still a concern for American Metals, the company did "heavy buying" when it started to hear about the price increases so it would have materials on hand. Now some of American Metals' large commercial contractors are purchasing and receiving products early to ensure availability for projects already booked. Some contractors are renting storage space because they figure those costs will be lower than the potential price increase of material in three months, she said.

    (Sharon Stalzer is a St. Louis-based freelance writer, college instructor and owner of sheet metal equipment maker Lion Machinery Inc. She last wrote about tax issues for family-owned businesses in the April issue of SNIPS.)