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AISC advises members on 232 impact

Mar 08, 2018 | 02:24 PM | Nat Rudarakanchana

Tags  steel, construction, AISC, beams, structural steel, plate, construction costs, Trump 232 232 construction

NEW YORK — The American Institute of Steel Construction (AISC), the top US trade association for structural steel, has advised its membership of possible market impacts from any Section 232 tariffs.

The Chicago-based AISC has received “many questions” about the effect on structural steel fabrication and construction markets since President Donald Trump’s March 1 announcement of proposed blanket import tariffs, AISC said in a bulletin sent to its 1,000 members on Wednesday March 7.

But the AISC - which promotes the use of structural steel like beams, plates and merchant shapes in construction - was quick to warn that a 25% increase in steel prices would not equate to a 25% increase in the cost of steel building projects.

In fact, an increase in steel prices, even of 25%, would likely end up as a total project cost hike of about 2%, the trade group estimated.

“First, the cost of material is just one of several components in the cost of a steel structure. And while percentages vary from project to project, even if the full impact of a 25% tariff on material cost was passed on to a project, it would likely impact the cost of the steel package by 5-10%, and the total project cost by less than 2%,” AISC wrote in a March 5 briefing for its members, which include structural and construction engineers as well as steel fabricators and mills.

Still, ultimately, “whatever percentage of a tariff-based cost increase is passed on to the market will be determined by the market itself,” the AISC wrote. Engineers and contractors with price questions should contact fabricators, not AISC, the technical institute said, noting that it does not deal with marketplace pricing.

Just as importantly, any steel tariff will likely affect rebar, a competing construction product to steel beams, the AISC noted. Rebar is used to reinforce concrete in buildings. The index cost of ready-mix concrete has increased by 17% over the past four years, according to the AISC.

It is “important to put any discussion of construction material costs in context, as the factors that affect costs have never been static,” the group noted. “The actual impact of a tariff will need to be evaluated against overall market factors, just like any other volatility in material costs… The cost of steel construction is responsive to market forces, and the structural steel industry operates in a competitive environment.”

Fabricated beams

In the meantime, the AISC has renewed its push for fabricated steel beams to be covered by any US import tariffs. Fabricated steel is not now covered by the 232 action, the group wrote in a separate March 2 letter to Trump, arguing that such products should be protected.

“As the implementing order is finalized, we are urging one critically important modification to the [US Commerce Department] report: Include fabricated structural steel in the products covered by the tariff,” the AISC wrote.

Otherwise, such tariffs will be easily circumvented by foreign fabricators, which will buy tariff-free steel products, fabricate the steel, then ship that fabricated steel into the United States, the AISC claimed.

Such products include carbon and alloy angles, columns, beams, girders, plates, hollow structural sections, joists, decking, piling and plate work - all suitable for assembly or installation into a structure, the AISC said.

“AISC has consistently advocated for a long-term, well-funded infrastructure investment plan, with strong Buy America provisions, as both a national economic priority and a national security issue,” the letter continued. “Our 1,000 members are US businesses – many of which are small businesses – that produce, distribute, fabricate and install structural steel for America’s great bridges, infrastructure projects and skylines.”

The US structural steel industry directly supports about 200,000 jobs, 82,000 of which are in fabrication, the “most labor-intensive” part of steel construction, the association noted.

The request from the AISC to include fabricated beams comes after a similar call by US beam producer Steel Dynamics Inc and after the AISC noted worrying imports of fabricated beams. Canada has erected import barriers against offshore fabricated structural steel, while US structural fabricators have complained of cheap Canadian fabricated components entering the US market, particularly in the Northeast.

US steel and aluminium costs have already climbed by up to 18% in the past two years, top commercial real estate firm Jones Lang LaSalle noted in a research brief on March 5.

With reference to the 232, “while broader global economic and trade implications remain to be seen, the construction industry is positioned to see the most impact in the near future,” the company wrote in the one-page memo.

“Construction is the largest consumer of steel and aluminium products needed for nearly every aspect of work, from new construction to fit outs and everything in between [rebar, structural beams, aluminium studs, furniture, etc.],” Jones Lang, which manages $58.1 billion of real estate assets and 4.6 billion square feet globally, wrote. “While the new tariff is an attempt to spur US production, we can expect near-term costs for the products to rise significantly in response.”

Nat Rudarakanchana

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