Precast Inc. - November/December 2008 - (Page 12) PRECASTER’S PERSPECTIVE Steel Crisis – Part 2 BY SUE MCCRAVEN | PHOTOS COURTESY OF HANSON PIPE & PRECAST Editor’s Note: “Precaster’s Perspective” offers a precast concrete manufacturer’s point of view on an issue of concern to the industry. Precast Inc. magazine welcomes reader comments on each topic. Responses to this issue’s topic of Steel Crisis Part 2 must be received by Jan. 26 for publication in the March-April 2009 issue. Please forward comments and/or suggestions for future topics to the editor at rhyink@precast.org. I Clifford A. Hahne is Hanson Pipe & Precast’s South Central Region president and the president of Hanson Pressure Pipe. His responsibilities include overseeing operations at 24 Hanson Pipe & Precast facilities in Arkansas, Louisiana, Oklahoma and Texas and nine Hanson Pressure Pipe facilities located in Florida, Illinois, Mississippi, Tennessee, Texas, Ontario and Quebec. n this second part of a two-part series, NPCA engineering consultant Sue McCraven interviewed Clifford A. Hahne and Marvin G. Smith, P.E., for their viewpoints on the unprecedented escalation in steel cost in the United States and how shortages impact the precast concrete industry. Part 1 of this series appeared in the September-October 2008 issue of Precast Inc., in which Bill Washabaugh Jr., vice president of Northern Concrete Pipe Inc., and Bob Risser, president of the Concrete Reinforcing Steel Institute (CRSI), shared their views on the current steel market. Visit www.precast.org to read Part 1. Can you explain why scrap steel is in such short supply in this country? Hahne: American processors do buy scrap steel, but scrap suppliers and U.S. mini mills sell to the highest bidders. It’s the international market that controls scrap steel. Asia, India and China have been willing to pay more for scrap steel such as crushed cars. It’s true that China keeps most of its scrap steel, as does Russia. In the United States, where we value entrepreneurship, no one blames the steel recyclers for trying to make money. Smith: The scrap market is a global market, and scrap prices are driven by domestic as well as foreign demand for raw material. U.S. recyclers buy scrap steel, but they are paying higher prices due to global demand for steel. What caused the price of steel to rise to the unprecedented levels we see today? Hahne: Currently, the United States does not drive the steel demand curve as it has done historically when this country was the biggest global consumer of steel. With the decline of the auto industry coupled with growth in China, India, Asia and third-world countries, the thirdworld countries now have a greater impact on the steel market. Further, there has been massive consolidation: three to four entities worldwide control the steel market and operate differently than in the past. The bottom line is that the United States isn’t the driver of the global steel price anymore. Smith: Steel is a global product. Demand for steel in China and India is driving the supply down and the cost up. Further increases in raw materials (iron ore and coke), energy costs, and a devalued American dollar have led to drastic increases in reinforcing steel costs for U.S. precasters. I believe (the current steel crisis) is due to global demand outstripping production capacity combined with an uncertain future in commodity and energy pricing. Is the higher cost of reinforcing steel reflected in your bids? Smith: As with most products, sometimes you can pass on the costs and sometimes you cannot. Many times precast concrete competes with other substitute materials. For example, some septic tanks are made out of plastic and/or fiberglass; these are not “like kind” materials/products to me, but some consumers are willing to sacrifice quality for a lower price. Many times the market will not allow the cost to be passed on – competition in some markets is very fierce and your competitor may choose to hold the price to get a competitive advantage. As the economy slows, many producers are satisfied to reduce their margins and try to offset fixed costs by keeping work flowing through the plant. Transportation costs have also contributed to a higher price of our products delivered to the job site. Hahne: Our intentions are to always pass on raw material costs to our customers, but there are exceptions. Our current economic situation Marvin G. Smith, P.E., is senior vice president of operations for Suhor Industries (SI) in Overland Park, Kan. He manages operations for the company and has profit and loss responsibility for 65 locations in 10 states. Since 1993, SI has manufactured feed bunks, storm shelters, Redi-Rock retaining walls, wastewater products and specialized architectural products, and is the nation’s largest manufacturer of Wilbert burial vaults. 12 NOVEMBER/DECEMBER 2008 | PRECAST INC. http://www.precast.org
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