Lead times for steelwork have plummeted over the past six months. From the dizzy heights of 16 weeks in the fourth quarter of 1998 – the highest in eight years – lead times are now only 12 weeks. For projects of less than 100 tonnes, short lead times of about eight weeks are possible. For very large projects of 5000 tonnes or more, delivery times may be as much as 16 weeks.
Shorter lead times have been helped by linking drawing offices to fabrication plants. Most fabricators’ drawing offices now use CAD – typically Xsteel or StruCAD – to control cutting and drilling of steelwork. Once fabrication drawings are complete, the cutting information is downloaded directly to the machines on the shop floor. One major steel contractor says: “The design office machines do most of the work for you, being self-checking. They ensure the design is correct and fabrication is to a closer tolerance.”
The improvements in the design and fabrication process are being felt on site, where frames are easier and quicker to erect, leading to a reduction in after-work and defects.
But increased use of IT means that detailed design information is required from the design consultants much earlier than usual. Many structural engineering practices are using the same software drafting solutions as the contractors, enabling the interchange of design details and so making the process more efficient.
With an expected slowdown in enquiries, lead times are unlikely to increase from their present levels and further slight reductions may be seen over the next year.
Enquiries this year have been variable. Most steel contractors reported the usual post-Christmas lull in enquiries. This was continued throughout January and February. There was a recovery in March, before another fall over Easter.
The downturn at the beginning of the year accounts for the pessimistic forecast for enquiries in this sector over the next two years. Current feeling is more upbeat.
Reports differ as to which sectors are strongest. Tony Tomalin-Reeves, sales office manager of Severfield Reeve, says: “The market is competitive at present, with many specialised, architecturally complicated schemes.” Whereas Andy Hayes of Gilcomston Construction says: “Numbers of enquiries have changed little since last year, but the quality has improved. There are more larger, less complicated projects.” The two contractors deal with different sectors, but their views demonstrate the variation in the market.
There is still concern for next year. With millennium projects now largely let, and car industry schemes nearly complete, contractors are looking to the commercial and retail sectors for work.
Orders and workload
Order books had a quiet start to the year. One contractor says: “Some orders were put in abeyance in January, and our February turnover was only 50% of that expected.” The same contractor added: “March, however, saw 15-20% [year-on-year] growth, through the projects put in abeyance in January coming back on the market.” Most contractors are now more confident for the remainder of the year, with some reporting full order books until late July.
Concern is greater for the long term. The British Constructional Steelwork Association’s forecast for UK consumption of steelwork shows an 8% drop in demand between 1998 and 2001.
The BCSA forecasts a downturn in the industrial sector over the next two years. This accounts for half the UK consumption of constructional steelwork.
Recent forecasts by the Building Material Producers show a decline in industrial orders of 6% over the period, but the private commercial sector – also significant for constructional steelwork – is forecast to increase 13%.
Mike Newton, managing director of Watsons Steel, says: “Orders are up this year but as there is still excess capacity within the industry, the UK market can only produce a finite amount of work for a certain number of contractors.”
This fine balance between supply and demand means many UK steel contractors are trying to secure work overseas, particularly within the European Union.
But this is not straightforward. The strong pound and the cost of UK steel and labour mean jobs are not won simply on price. Successful UK steelwork contractors are usually providing a value-engineering service coupled with a significant design input.
Contractors report an increase in the London new-build office market, with many claiming that steel is edging out concrete frame.
One major steel contractor says: “Nine years ago, concrete had perhaps 70% of the frame market. Now, the balance has reversed in favour of steel, which commands 60% of the market.” Other steel contractors support this view.
Many of the traditional barriers to steel frames have now been addressed, with factory-applied intumescent paints for fire protection and reduction in sound transmission through design engineering.
Slim-floor systems have also reduced the difficulties of routing services. The benefit of precision off-site fabrication and quick on-site assembly reduce the need for on-site labour and produce a quality product.
Figures supplied by the British Constructional Steelwork Association and British Steel.
The slight downturn in 1999 enquiries and corresponding increase in market capacity prompted the first decline in structural steel tender prices since the end of 1992. The last Gardiner & Theobald tender price indicator survey results show that prices are likely to level out this year, before a slight recovery in 2000.
Improvements in efficiency have reduced overheads, but these have been swallowed up by lower tender bids. Over the past few weeks, contractors have become slightly more optimistic, as order levels have improved.
Labour costs increase by 5% a year, but materials costs remain largely unchanged. One steel contractor says: “Steel prices are the same today as they were 10 to 12 years ago.”
Every time the price of steel rises, rebates offered increase accordingly. Most UK steel contractors state a strong preference for British Steel, because of the high quality of the product, even when tendering for European contracts. However, the strength of sterling allows great savings to be made when using imported steel; steel from Belgium and Germany is favoured, as it carries test certificates.
With tight margins and stable materials prices, the main pressures on tender prices are labour and related overhead costs. No steel contractors report labour shortages. But new technology – particularly on the IT side – necessitates continual investment in training and staff development. Health and safety is another aspect receiving substantial investment.