How the Price of Steel in the Marketplace Affects Construction Costs
Although many factors influence the costs of commercial construction the impact of fluctuating steel prices can be one of the most significant ones. The price of steel is affected by global demand, and when there is a construction boom in one nation, the effects are even felt by Minnesota construction companies.
With sluggish demand around the globe, steel prices fell in May of 2010, but with demand heating up again, prices have been on the rise in recent months. The question then arises: How can Minnesota construction companies protect themselves and their clients from the impact of the rising price of steel?
Steps a Minnesota Building Contractor Can Take
The easiest way for steel buyers to prevent "sticker shock" when prices rise is to secure a locked-in price quote from a seller. The quote will remain valid for as long as the contractor needs to be able to rely on the supply. Sellers, however, will want to limit price quotes or have qualifying language in contracts in case of price increases from suppliers.
Minnesota construction companies can also match time periods for how long a bid must remain open with how long the price quote they rely on is valid. Although many contractors follow this rule, they often do not go back and reconfirm the price if they're asked to keep a bid open longer.
The cost of a construction project, then, can rise even after a contract is negotiated if sellers are impacted by the rising cost of steel from their suppliers.
Structural Steel and Rebar
Structural steel is not the only building material that affects construction. Rebar, short for reinforcing bar, is a steel bar used to reinforce masonry or concrete structures. Rebar prices tend to follow those of structural steel, within a range of about 10 per cent. The fluctuation of steel prices in general is influenced heavily by imports from Asian markets, and also by the supply of scrap metal.
What to Look for in Predicting Steel Prices
When Minneapolis builders look to the future, there are a number of things that they can use when predicting where steel prices may go, but the most crucial is new construction. 20% of all steel is consumed by new construction. Other factors include foreign demand, production capacity, and overall economic growth. General contractors can effectively monitor the cost of steel and rebar and ensure that their clients are not adversely affected by fluctuating steel prices.
The Outlook for Steel Prices
A recent survey of steel manufacturers indicates that recent price increases will hold. The reason behind this is that many buyers waited to find the bottom of the steel market, and now face drastically reduced inventories.Any Minnesota construction companies that have not already locked in prices on structural steel and rebar can be expected to feel the effects of these price increases. Unfortunately for clients of these ill-prepared companies, they will undoubtedly be affected as well.
Questions and Answers
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