Here's how higher steel prices could affect the Triangle's building boom

Original article written by Max Diamond on The News & Observer

North Carolina's construction industry has been hit with higher costs — and is bracing for them to go higher still — as steel and aluminum suppliers react to President Donald Trump's executive order increasing tariffs on those imports.

"Steel is everywhere in construction," said David Simpson, president of Carolinas AGC, a construction trade association. It is used in concrete, in bridges, to make the structure of buildings, for beams, in staircases, interior walls, and in hardware.

On March 8, Trump signed a 25 percent tariff on imported steel and a 10 percent tariff on aluminum. The president has said higher tariffs are needed to avoid further weakening America's domestic steel production, and risk a steel shortage in a national emergency.

While Trump's order exempts steel imported from Canada and Mexico, last year North Carolina only imported a total $30 million of steel from those two countries. According to the North Carolina Department of Commerce. Of the $150 million of steel imported into the state, the majority came from Brazil with over $52 million in steel imports.

The tariffs went into effect on Friday, March 23, but immediately after Trump signed the order, construction companies were hit by a price hike, and it wasn't just from foreign steel makers.

On March 9, Charlotte-based Nucor raised its prices by $45 per ton of steel. Bill Pruden, president of Steel Technologies, a contractor in Rocky Mount, was one of the affected customers. Pruden said he saw an overnight increase of 5 percent. That increase followed price hikes of 26.8 percent over the past three months as steel producers anticipated the tariff.

Because steel is a major part of the price of the whole project, relatively small changes in the price of steel can have a major impact on a project's total cost and leave a developer with too small a profit margin to move forward, said Raleigh developer Gregg Sandreuter.

"Let's say steel is 10 percent of the cost of your building," said Sandreuter, whose properties include the SkyHouse luxury apartment tower in downtown Raleigh. "Then a 25 percent increase on 10 percent of your total building costs is a 2.5 percent on your total project cost. That just might cause the deal not to work."

Developers often spend years planning a particular construction project, assuming relatively stable steel prices. But recently producers, "Will not guarantee these prices but for three days," Pruden said.

The current chaotic price escalation will make developers re-design projects in order to stay within budget, said Chuck Pinnix director of Sales, at Buckner Steel Erection in Graham.

"What we're probably gonna see is a lull of projects sitting still or not moving forward," Pinnix said. He predicts that this will last about six months to a year.

If the tariffs remain long-term, Pinnix says construction projects will remain more expensive and the owners will have to charge higher rates for their tenants.

Simpson with Carolinas AGC said his organization expects more price hikes. "The proposed increases may make good political soundbites," said Simpson, "But we in the construction industry are very concerned about how it will drive up prices on both imported and domestic steel."

While Nucor did not address an emailed question about future price escalation, Katherine Miller, a spokesperson for the Charlotte company said, "The proposed tariffs are important for the long-term financial health of the steel industry. We support the president sending a strong message to foreign competitors that dumping artificially cheap steel products into our markets will no longer be tolerated."

In the future, Pruden predicts that construction clients will opt for wood or other alternatives to steel. Steel and steel contractors will lose their market share. "The amount of work we could potentially sell will decline," he said.

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