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Developers awarded “quite a few” contracts immediately in the wake of news that President Donald Trump won’t exclude Canada, Mexico and the European Union from 25% import tariffs, according to Joe Casucci, chief executive officer of FJM Ferro Inc, a midsized fabricator and erector for greater New York City.
“We’ve been awarded quite a few contracts immediately because of this [Section] 232,” he said of the knee-jerk reaction by project owners and construction managers. “People have been very concerned that this steel gets released immediately as opposed to the prototypical drag that happens when you’re bidding a job.”
This is despite structural steel prices rising since the initial early March announcement of impending Section 232 tariffs, according to Casucci, who fabricated around 15,000 tons of structural steel last year.
W8- x 8-inch steel beams have risen four times since the start of 2018, to stand at $42 per hundredweight on Thursday May 24, according to American Metal Market’s latest assessment.
Since March 9, US beam mills have announced two price hikes, of $45 per ton and $35 per ton respectively, for most beam products – that’s on top of implementing a $20-per-ton surcharge for floor stock effective April 2.
FJM Ferro, which works mainly on New York metropolitan projects, used to be able hold its bid and steel prices for 30-60 days but present market uncertainty means it now only holds prices firm for 15 days, according to Casucci.
His service center suppliers have informed him that prices will continually and gradually increase in the coming months, in their best projections, he noted.
Abruptly higher steel prices have caused complications with his own customers, with developers sometimes having material cost contracts that prevent sudden cost escalation above certain thresholds, he said.
It’s been “an interesting endeavor” to try to get higher steel beam prices “forwarded over to our clients,” Casucci told American Metal Market in an interview on June 4.
In some cases FJM Ferro has to absorb the extra costs without developers paying the burden, while in other cases clients are “decent enough” to take on the extra costs – although this varies widely depending on the project, he said.
Casucci used to occasionally buy imports, primarily in “mega” and “jumbo” beam sizes from Luxembourg, but has recently stuck to sourcing domestic material, he said, noting that he has had no problem securing domestic supply. But he buys mostly from service centers, and only sources from mills for relatively infrequent larger jobs, where he outsources steel to a rival fabricator.
His biggest problem, as a single-site fabricator, has been his inability to hedge buy, or to stockpile larger amounts of steel, due to a lack of space and his reluctance to pay big storage costs.
“We can buy all the material in advance. But where am I putting it, where am I locating all this material? That’s where the conflict arises” for a smaller fabricator like myself, Casucci said.
As for the merits of the Section 232 tariffs, he is “confused” by its implementation, specifically about the rationale of including or excluding Canada from the Section 232 order. Canadian fabricators sell many steel projects into the Northeast and New York, and Casucci has Canadian fabricators among his clients so his work is directly impacted by the shifting scope of the Section 232 policy, he said.
“I’m all for the betterment of our nation but I’m just trying to understand how this [Section 232] translates to us and how we can get around being too affected by this,” Casucci told American Metal Market. “I just hope the steel prices don’t keep escalating… That’s all I care about.”