If steel prices are throwing you off these days, you’re not alone.
At Compass, the moment we could tell something was up, we got busy digging deep to learn the truth and share with our clients, partners, and friends. And that includes you. So today, we want to give you the down and dirty with our 2021 Steel Pricing FAQs.
Swelling steel costs and lead times in recent weeks is dashing budgets and timelines—and fraying a few nerves along the way. Not to mention the construction industry is still reeling from the pandemic’s effect on other commodity costs. And with steel inflation rate at levels not seen in over a decade, many of our friends in industrial development are asking questions and making tough decisions. That’s why we’re doing everything we can to shed light on the situation and give solid guidance.
One of the core values here at Compass is Stewardship. We are deeply committed to caring well for others and being resources at every turn. That’s why we really dug in with our trusted partners, peers, and clients to learn the facts behind steel pricing jumps. And we want to share what we’ve learned with you, in hopes that this will help you make informed decisions in the days to come.
Steel Pricing 2021: FAQs
1. What’s the latest on structural steel prices and fire protection on industrial warehouse/distribution centers?
In recent weeks we’ve seen structural steel and joist and deck pricing jump as much as 75-80% as compared to 2020, with fire protection around 10-20% higher. At the time of this post, the structural steel package pricing is around $3.50-$4.00/square foot higher than Q4 of 2020. Fire protection is averaging $.10-.25/square foot higher than last quarter.
2. What’s causing the spike in steel prices?
As with many issues in our industry, the answer isn’t cut and dry. Many factors have gone into the price jump, but here are a few we’ve identified by talking with those close to the source:
- Global demand for scrap steel is high.
- There is a global shortage of scrap material.
- Joist and deck suppliers have a 40-50% greater backlog this year than last.
- Steel erection pricing has gone up by 10-15%.
- The new administration’s plan to release foreign tariffs will eventually cause lower domestic pricing (due to increased global competition) but that has not yet played out.
- The pandemic shut down steel mining plants, reducing competition for mini mill steel manufacturers that utilize scrap for their products. New production is expected to come back on line in Q3 2021 which likely will cause pricing to stabilize by Q4 2021.
- The Midwest is behind the escalation curve compared to the east and west coasts, placing pressure on this area to equalize.
It’s a complex situation for sure, but the important thing is this: going into projects with open eyes and solid data means better end results.
3. What kind of lead times can we expect with structural steel right now on warehouse projects?
Lead times for joist and deck have more than doubled and are booked out to August/September (20-24 weeks).
4. What’s the outlook for steel pricing for the rest of the year?
You should expect structural steel prices to increase 10-20% per month through the end of this quarter. After that, we could see a leveling off in late Q2 and Q3, and hopefully a decline starting in Q4.
5. What is the outlook for Fire Protection materials?
Fire protection piping materials are also expected to rise 10-20% over the next few months and then start coming down in Q4. We anticipate that pricing will return to Q4 2020 levels as we move into 2022.
6. What should be done for projects already designed and ready to award?
Projects that are ready to award might be best suited for getting pricing locked in on steel and fire protection immediately. If the budget allows for the already inflated prices, it might be time to pull the trigger before additional increases take hold. Delivery schedules will be the main factor where delivery dates with high demand will also see higher prices.
7. Should projects in design be postponed?
Obviously a number of factors have to be considered, but we would definitely recommend a careful evaluation of cost and timing before moving ahead. Knowing that prices are still trending upward at this point, it may make sense to put a bow on design and be ready to strike when prices start declining. The key will be to get locked into a lower demand delivery date 5-6 months before the delivery date.
This is a VERY FLUID situation and we should encourage our clients to keep in close touch with us as they evaluate the situation.