Price of steel in China impacts Buffalo projects
What could have the biggest impact on the final price tag for a new shopping plaza in Amherst?
Believe it or not, the answer may not lie in Amherst itself, but rather in a country thousands of miles away.
The price of steel in China heavily influences construction costs throughout Western New York, impacting the bottom line of virtually every construction project.
"A lot of material, particularly building material, is made directly from steel so when prices rise and fall as dramatically like they have in the steel industry, that ultimately has an impact on the consumer," says Kenneth Houseknecht, vice-president of communications and investor relations for Gibraltar Industries, a Buffalo-based manufacturer and distributor of metals for building products.
The rising price of steel in China also impacts the direction taken by architects as they try to develop building designs they hope will provide financial relief and offset higher steel costs.
The price of steel has skyrocketed primarily because of the large demand for the product in China. As the world"s most populous country continues to expand, the requests for new buildings increase, resulting in a construction boom exploding in cities like Beijing, Hong Kong and Shanghai.
Structural steel in particular is in high demand throughout Asia as developers look to meet the needs for requests of high-rise construction. That in turn has had an effect on those who work in the architectural and engineering industries. Architects must constantly review steel prices in order to make economically-sound business decisions.
"We"re going to be effected negatively by the increase in costs for steel," says Tommaso Briatico, a Buffalo-based architect who has done work for Rich Products, Buffalo Newspress and several area churches. "It"s coming to roost now. That really is the reality and we have to deal with the hand we are given."
Briatico said a nearly 100 percent increase in the price of steel within the past two years has forced those in his industry to carefully factor how much steel will be used for a particular project.
"Steel is a very, very important ingredient for what we do," says Briatico. "You really can"t get away from not using metal. It really is 99 percent of the time you want and need to use steel. Now it"s just a matter of paying close attention to detail when it comes to the thoughtfulness of a design while also keeping in mind pre-assembly and other areas that will be impacted."
Both U.S. and global steel prices have escalated far beyond all earlier projections.At this point it is unknown what the future direction of prices will be because of uncertainty when it comes to the long-term factors of price changes within the steel industry.
"Ultimately what we are looking for is stability in the industry when it comes to the price of steel," says Houseknecht. "Some sort of capacity on pricing is what is most desired."
While Houseknecht says Gibraltar makes its money on what they do after they acquire the steel by selling their building product materials to companies in a variety of industries, the rising cost of steel does have an impact on their bottom line.
"When you buy as much steel as we do, you can never be immune," says Houseknecht. "Even though we don"t produce the steel, we do use it to make products. So the volatile situation with the pricing patterns and the structural change in the steel industry does have a long-term impact on everyone associated with the industry."
The majority of the world"s increase in steel consumption in the past 10 years or so has come from China.
From 1997 to 2003, China increased steel consumption from 100 million tons to nearly 260 million tons, the latter a figure that is nearly double the total consumption in the U.S.
This increase in steel demand in China has put pressure on the global infrastructure for steel, an infrastructure that is much more involved that just steel making and roll mill work.
While there is some progress being made in China"s long-term plans to increase its own steel making capacity, the simple addition of more steel itself does not solve the problem of not enough raw materials being available.
The Chinese impact on supply and demand is dramatic, with the current heavy demands for steel products likely to have repercussions several years from now.
"We just put a job out to bid and it came back in higher than what was budgeted," says Briatico. "I think it is obvious that the cost of steel did have a dramatic effect on why the bid came in like that and that"s a scenario we may see more often as time goes on if the prices for steel continue to escalate at such a dramatic level."
Believe it or not, the answer may not lie in Amherst itself, but rather in a country thousands of miles away.
The price of steel in China heavily influences construction costs throughout Western New York, impacting the bottom line of virtually every construction project.
"A lot of material, particularly building material, is made directly from steel so when prices rise and fall as dramatically like they have in the steel industry, that ultimately has an impact on the consumer," says Kenneth Houseknecht, vice-president of communications and investor relations for Gibraltar Industries, a Buffalo-based manufacturer and distributor of metals for building products.
The rising price of steel in China also impacts the direction taken by architects as they try to develop building designs they hope will provide financial relief and offset higher steel costs.
The price of steel has skyrocketed primarily because of the large demand for the product in China. As the world"s most populous country continues to expand, the requests for new buildings increase, resulting in a construction boom exploding in cities like Beijing, Hong Kong and Shanghai.
Structural steel in particular is in high demand throughout Asia as developers look to meet the needs for requests of high-rise construction. That in turn has had an effect on those who work in the architectural and engineering industries. Architects must constantly review steel prices in order to make economically-sound business decisions.
"We"re going to be effected negatively by the increase in costs for steel," says Tommaso Briatico, a Buffalo-based architect who has done work for Rich Products, Buffalo Newspress and several area churches. "It"s coming to roost now. That really is the reality and we have to deal with the hand we are given."
Briatico said a nearly 100 percent increase in the price of steel within the past two years has forced those in his industry to carefully factor how much steel will be used for a particular project.
"Steel is a very, very important ingredient for what we do," says Briatico. "You really can"t get away from not using metal. It really is 99 percent of the time you want and need to use steel. Now it"s just a matter of paying close attention to detail when it comes to the thoughtfulness of a design while also keeping in mind pre-assembly and other areas that will be impacted."
Both U.S. and global steel prices have escalated far beyond all earlier projections.At this point it is unknown what the future direction of prices will be because of uncertainty when it comes to the long-term factors of price changes within the steel industry.
"Ultimately what we are looking for is stability in the industry when it comes to the price of steel," says Houseknecht. "Some sort of capacity on pricing is what is most desired."
While Houseknecht says Gibraltar makes its money on what they do after they acquire the steel by selling their building product materials to companies in a variety of industries, the rising cost of steel does have an impact on their bottom line.
"When you buy as much steel as we do, you can never be immune," says Houseknecht. "Even though we don"t produce the steel, we do use it to make products. So the volatile situation with the pricing patterns and the structural change in the steel industry does have a long-term impact on everyone associated with the industry."
The majority of the world"s increase in steel consumption in the past 10 years or so has come from China.
From 1997 to 2003, China increased steel consumption from 100 million tons to nearly 260 million tons, the latter a figure that is nearly double the total consumption in the U.S.
This increase in steel demand in China has put pressure on the global infrastructure for steel, an infrastructure that is much more involved that just steel making and roll mill work.
While there is some progress being made in China"s long-term plans to increase its own steel making capacity, the simple addition of more steel itself does not solve the problem of not enough raw materials being available.
The Chinese impact on supply and demand is dramatic, with the current heavy demands for steel products likely to have repercussions several years from now.
"We just put a job out to bid and it came back in higher than what was budgeted," says Briatico. "I think it is obvious that the cost of steel did have a dramatic effect on why the bid came in like that and that"s a scenario we may see more often as time goes on if the prices for steel continue to escalate at such a dramatic level."