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Piling → lead times stayed at six weeks between the second and third quarters of the year, although this could increase to an unprecedented seven during 2005. All contributors say they are busy, and that the availability of plant is their main constraint. One supplier notes that cement prices are expected to rise during 2005, which will push up prices in this sector as well.

Lead times for concrete works → have been maintained at five weeks overall. Reinforcement price rises are set to continue during 2005.

The lead time for structural steelwork ↑ has increased by one week to 12 weeks, as anticipated. Fluctuating steel prices continue to affect suppliers, who are busier with enquiries and projects than in the previous six months. This could lead to more increases during 2005.

As expected, curtain walling → was unchanged again at 19 weeks. Although steel shortages are causing difficulties, steady workload has allowed this to be managed with low impact. Some suppliers have been affected by the delayed commissioning of a production unit at one of the glass suppliers, but this has not yet resulted in an increased lead time.

The average lead time for atrium roofing ↑ is now 29 weeks. This is the first increase in this lead time for a year and further increases are not expected. Pressure on procurement caused by steel and glass shortages has led to the rise.

Lead times for the membrane roofing → sector were maintained at seven weeks. Profiled roofing lead times stabilised at 13 weeks after their fall last quarter.

Drylining → is unchanged at nine weeks – however, it is still difficult to provide fixed prices for the metal components. The lead time for plasterboard has now increased to three or four days. The office schemes expected to start on site next year may result in an increase during 2005, bringing an end to the steady lead times experienced over the previous three years.

Lead times for demountable partitions → are unchanged at nine weeks although the minimum and maximum times vary among suppliers. Several say that changes to steel and aluminium prices are beginning to result in increased tender prices as stock components are replenished.

General joinery → firms have reported no change in the lead time of 13 weeks, following the increase last time. Suppliers are already busy for 2005 and lead times are likely to increase by next summer.

Raised floors → are unchanged at six weeks, as they have been for the past two years. Supply of base coil is now improving although lead times are not expected to reduce as the flow of office fit-out contracts should increase towards the end of 2005.

Suspended ceilings → are steady at 16 weeks. Lead times have not yet been affected by the steel shortages although suppliers are unable to provide long-term fixed prices. Some suppliers are concerned about labour shortages during the second quarter of 2005 as preconstruction projects begin on site.

Decorating → lead times are unchanged at five weeks. New enquiries and projects are at a similar level to that of six months ago.

Ductwork → was maintained at 12 weeks overall. Steel price rises are resulting in higher tender prices, although lead times are being maintained. Some suppliers are able to commence with only seven weeks’ notice.

Lead times for sprinkler installations → remain at eight weeks, despite the supply of steel piping continuing to cause problems.

The average lead time for electrical suppliers ↓ has fallen a further two weeks, as expected, to 13 weeks overall, reflecting continued spare capacity. Both enquiries and new projects are quieter than in the previous six months.

Uninterruptible power ↓ suppliers are now quoting a six week lead-in, a drop of one week overall. Items such as magnetic coils are on a longer lead-in than previously reported because of a high level of specialist orders.

Fire detection systems → still require 11 weeks, although enquiries are busier than six months ago and lead times may increase if workload cannot be absorbed in 2005.

Several suppliers are advising that 2005 order books are becoming busy. Many believe the resurgence of the commercial market will lead to an increase in lead times during 2005.

• To contribute to this article, contact Rob Darrow on rdarrow@Mace.co.uk or visit www.mace.co.uk/foresite

Lead times

Since the last review of structural steel frames some 12 months ago, lead times have risen from 10 to 12 weeks; this upward trend has been maintained over the year but follows some of the shortest lead times for structural steel in the past decade.

The increase has been driven by a reduction in capacity caused by the relative rise in the cost of steel frames, with designers looking at alternative frame solutions, coupled with an overall reduction in capacity.

Lead times are likely to increase over the next 12 months as some suppliers have now filled their order books and have a shortage of spare capacity in fabrication and design. Furthermore, the predicted upturn in the commercial market due in 2007 may push lead times up to 14 weeks and above.

The capacity of suppliers and the availability of bulk steel at efficient prices is driving the lead periods. Although demand is predicted to return, suppliers are still cautious. Any bespoke frame designs will always require a longer design phase and lead time; those procuring frames in the next few months should keep this in mind.

Market conditions

New orders in the 500 to 1000 tonnes market are coming back, slowly, driven by new starts in the commercial sector. Several large commercial office developments have been kick-started by pre-lets in London and the South-east, with several more now being picked up on the radar.

Several corporate occupiers, particularly in the legal sector, are looking for new space and this is boosting confidence in the key commercial markets. Against this climate, steel will tend to benefit because of the quick deliverability and flexibility of frame design over concrete solutions.

The structural steelwork industry has had a better 12 months in the PFI and public sector market but, overall, new orders are marginally down on 2003, although the industry is operating at full capacity.

Steelwork designers and CAD operators are in short supply, which may cause problems in the short term for suppliers to design competitive advantage into their bid.

Going into 2005 and 2006, new orders should increase provided that stock steel can be bought competitively as a raw material for fabrication. The fluctuation of the price from Corus has created problems on projects requiring a fixed price over a long period, but this can be overcome by earlier ordering or reserving stock with an advance order. Fabricators have the ability to increase their output capacity by increasing the number of shifts and reintroducing overtime working.

Tender prices

The market is still very competitive but has seen a wholesale cost increase in the past 12 months. This reflects the increase in the base cost of stock steel.

Since August 2003, the cost of stock steelwork has risen 50-60% and is forecast to increase further as global demand outstrips supply, particularly in China. Corus has just implemented a £30/tonne increase, and has warned of a further £50/tonne increase in January 2005. All this is in addition to the August rise of £20/tonne, bringing the cost to more than £600/tonne.

The market has seen some moves by larger contractors and clients with orders in excess of 1000 tonnes to pre-order and reserve stock direct from the rolling mills at predetermined prices. Clearly, this has boosted order books and slightly distorts the demand picture for the latter part of 2003 and 2004. The market price is continuing to shift, however, and contractors are finding it more difficult to offer fixed-price contracts.

Although Corus has undoubtedly benefited from these price rises – it has posted its first profit for some time – the market for contractors is still very competitive as raw steel market costs affect everyone. Most contractors do not have the capacity to benefit from pre-ordering and buying ahead of market rises so must find a competitive advantage to win work. Contractors assisting or taking over responsibility for the detailed design of connections and innovative frame solutions are at the head of the market and winning the most work.

All this has translated into massive tender price rises with an overall increase of 20% in 2004. We are forecasting further increases in 2005, to reflect the rises in raw material price and the market response to growing demand. Next year will see a further tender price rise of more than 7% on 2004, representing an increase of more than 30% in the past four years. The Gardiner & Theobald tender price indicator is predicting that pricing will peak in late 2005/early 2006. Until then, tender prices will keep rising as demand and resource costs increase.

Typical tendered rates in the past quarter for erected, fabricated steel frames on major projects of more than 500 tonnes are: multistorey £1300-1500/tonne; partial steel frame £1100-1200/tonne; complex frame £1600-1800/tonne.

Small projects with less than 50 tonnes or those with bespoke frame solutions are frequently reaching the £2000/tonne level. Estimators should take careful note of future price rises that may affect the validity of their estimates or leave them with severe cost problems.

Future developments

Recycling and power costs
The reuse of steel is increasing, particularly when more demands are being made to reduce embodied energy in construction materials. Steel is perceived as high in embodied energy or embodied carbon dioxide, so reuse with minimum rework and fabrication, therefore, is seen as an advantage. Steel can be 100% recycled and recast although this requires further embodied energy in the smelting process and onward transportation.

Of the estimated 700 million tonnes of global steel production a year, almost half is recycled from scrap steel.

With the projected increase in fuel costs across the UK and tighter controls on pollution outputs across the world, the impact of power costs will be felt in steelwork production. It is likely that more steel will be recycled and reused with less resmelting.

Deconstructing steel frames
It is likely that designers and clients commissioning building works will encourage the development of steel systems that can be readily disassembled at the end of their economic lives. This has the further advantage of reducing disruption and nuisance because a building does not have to be demolished.

Iron ore demand
In addition to the energy cost of production, the structural steel market is exposed to an increase in demand for iron ore. Demand is expected to rise further as emerging markets such as India and the new European Union countries increase industrial output. Although Corus has supplies of raw materials from Brazil guaranteed for the next 10 years, this does not help the drive to reduce energy costs for transportation and logistics, nor might it seem sustainable or reliable.

Retention bonds
The steelwork sector continues to advocate the use of retention bonds rather than retentions – that is, the practice of withholding a percentage of a contractor’s fee until after the works have been completed. The use of bonds has been followed by other sectors as the system becomes more familiar to practitioners and clients. The British Constructional Steelwork Association bond is circulating as a draft issue but still has to meet some concerns regarding the financial cover and the triggers for default, as these are weighted in favour of the contractor at present.

Unless these questions are answered, clients may prefer to opt for cash retention, particularly as it is hard to demonstrate that the use of bonds has caused any reduction in tender prices in the past year – these have been lost within the overall market rises.