I didn’t think anything would topple sustainability and steel section prices off the most talked about issues in the steel construction industry. Well cold rolled deliveries have managed to do it! I know many steelwork contractors are having some very difficult conversations with Tier 1 Contractors in relation to the delivery and price of cold rolled products. Cold rolled suppliers have an excellent track record of servicing steelwork contractors in a just-in-time fashion, but long-term relationships are being tested in the current climate. Where Tier 1 Contractors have won competitive orders with “old” prices and “old” lead-in’s, somewhere along the line there are going to be problems. The secondary effects of the COVID-19 lockdowns are now being seen all through the supply chain.
I have heard on a number of occasions that some QS’s believe that prices and lead-in’s will reduce if clients delay for a while. I don’t think this will happen in the short term. Steelwork contractors in the main are not benefitting from the price rises and they are certainly not benefitting from contracts being delayed. I don’t think for one minute that supply chains to other framing material contractors are not floundering as well. One wonders however, whether the argument has turned from the traditional question of will that be a steel or a concrete job, to whether that building is now affordable?
Occasionally, analysts will inform the government that buildings are expensive, they may well be, but I don’t think the average steelwork contractor is to blame. Over the years, I’ve seen plenty of accounts for steelwork contractors and it doesn’t make for good reading when you consider the majority of buildings are bespoke and the risks steelwork contractors are asked to accept. Top-performing companies fail to make in the order of 10% net profit year-on-year and I’m sure that we will see reduced profits for many companies in the next set of accounts. In contrast, I recently received a “teaser” from a company selling garden sheds. Not making them in the UK of course; they will be shipped in and delivered pretty much straight to the garden. Nothing bespoke about these garden sheds, you get a few choices of style, but that’s it. The average gross profit that company has been making is in excess of 50%. I’m just wondering what the average gross profit of bespoke steel “sheds” delivered in the UK will be in comparison.
Over the last twenty years the steel construction industry has taken pride in its efforts to reduce health and safety (H&S) incidents. I don’t know of any MD where H&S is not high on their agenda. Threats of being fined and being prevented from working on site changed behaviour. There was a financial cost associated with the transition to a great H&S culture, but it was less than the threats associated with H&S incidents. I am concerned that similar costs will be incurred in changing behaviour on the equally important and emotive subject of sustainability. This time I think we will need to pass on some of these costs to the client, which will further challenge the affordability of buildings.