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Analysts find little for steel framers to cheer about

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Steel-framed houses beat their wood-framed competitors hands down in terms of durability, among other factors, but steel framing has been unable to make significant inroads in the housing sector, in part because there just aren't enough trained workers to go around.

Steel framing accounts for less than 1 percent of all houses built in the United States. Steel used in single-family housing totaled slightly less than 100,000 tons in 2007, the most recent year for which data was available, down about 20 percent from 125,000 tons in 2005, according to Mark Nowak, president of the Steel Framing Alliance, an industry trade group that promotes the use of steel framing in residential and commercial construction. He noted that the figure declined because residential builds have been depressed.

Steel frames are stronger, straighter, fire resistant, termite proof and can withstand the beating of an earthquake and tornado much better because the structures don't move, shrink and expand like the traditional wood-framed house. In addition, the majority of the construction uses a lightweight galvanized product that doesn't rot, warp, rust, crack or split and has a longer lifespan. Besides being "green," there are savings associated with steel-framing—in high-wind areas, for instance, insurance rates can be reduced.

Despite all these attributes, analysts agree that the mentality of workers is partially to blame. "My understanding is the problem lies with changing the mindset of smaller contractors that are used to working with wood. This can slowly change, but pricing volatility and a slow housing recovery can make growth challenging," UBS Securities LLC analyst Timna Tanners said.

Chuck Bradford, analyst at Affiliated Research Group LLC, agreed, saying that home builders possess a hammer mentality as opposed to the screw gun mentality.

"The housing market has grown up around, and been dominated by, wood framing," Nowak said. "We find people are now using a mixture of materials and are competitive in the floor framing product."

Specific markets and certain parts of the country are more receptive to steel framing than others, he noted. Mid-rise markets, including five- to seven-story apartment buildings and hotels, where steel competes on an even playing field, are seeing growth in the use of steel framing.

Certain geographic areas prone to moisture and severe storms—the Gulf Coast, Arizona, California, Nevada and Hawaii among them—are stronger markets for steel framing. "It is durable and resistant to natural disasters, termites, high winds and seismic forces. And it is non-combustible," Nowak said. "If it is designed correctly, it will hold up well in all those situations. But areas outside these regions, we are not seeing demand."

Tanners agreed that steel homes fare better in certain climates. "I think the best shot for better demand lies in coastal areas with hurricane threats, such as Florida," she said. "But the bottom line is it will take time and a better housing market."

The only limitation with steel lies in the mindset of builders, Nowak said. "It is an unknown for a lot of builders and framing contractors, but that is changing. We are seeing more and more engaged in the business through training and education efforts." He noted that the market had been growing until the collapse in residential construction.

A marketing approach that has been described as weak and misdirected is another reason cited for the steel industry's inability to gain a foothold in residential building.

In the scope of residential construction's importance to steelmaking in the United States, it is "meaningless," Bradford said, blaming misguided marketing and other strong markets for hindering growth. "At one time there was a big push to develop the steel-framed housing market because it's a great product," Bradford said. "But the industry doesn't know how to market it. And in the last few years, nobody cared about developing new markets because everything was so strong. One of the problems is poor marketing compared to how the aluminum industry, promotes its products."

Trade groups like the American Iron and Steel Institute have "focused on trade as opposed to developing the market for steel. And the focus is wrong," Bradford said.

"Don't market that you are trying to save money, but are offering a better product. Lumber goes up and down like a yo-yo. So if you try to sell steel, you are going to lose, Bradford said.

Better approaches could be to address the fact that there is no first-cut lumber anymore and that it is hard to get really straight lumber. Steel houses also are easier to finish and the plumbing and electric work is actually cheaper. And, unlike wood, steel is non-organic and doesn't attract mold.

"You have to get the customer to want steel," said Bradford, who is bullish on the product, pointing out that structures built of steel were the only ones to survive Hurricane Andrew virtually unscathed. The 1992 hurricane, which hit south Florida as a Category 5 storm and later made landfall in Louisiana as a Category 3, resulted in 23 deaths and caused $25 billion in property damage, making it one of the costliest hurricanes in U.S. history.

LISA GORDON


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