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01 Overview

As the UK and global construction markets continue to pick up pace, so does demand for the key structural elements: piling, concrete and steel.

Global demand for steel is growing at about 10% a year, although a slight slowdown is predicted for 2007. Steel remains a popular choice because of its speed and ease of erection and is especially popular for offices.

Concrete remains the material of choice for the residential sector thanks to its sound and fire-proofing qualities, as well as its low cost. Concrete鈥檚 excellent thermal mass is also being considered by more and more designers as a way of significantly reducing the amount of energy used in buildings.

Prices have increased by at least 5% across these structural elements and by much more in the case of steel. In 2006, the raw price of steel rose by more than 20%. This has had a knock-on effect on prices for concrete frames and piling, as both use steel reinforcement. This year, steel costs will again have a ripple effect throughout the construction process. Nevertheless, the order books for piling in 2007 are getting full and the outlook is positive.

Sustainability is high on the agenda for the construction industry as government and clients demand greener construction. These concerns are reflected in the 鈥淗ot topics鈥� affecting steel and concrete manufacturers, below.

Piling

02 Market overview

Piling companies owned by main contractors generally reported that they had a busy 2006, although a number of projects unexpectedly moved back to 2007. As a result, order books are filling up fast, although there is still capacity in the second to third quarters of this year.

Major piling specialists report a high volume of early pricing enquiries for large projects, but are unwilling to forecast figures too far into the future because of uncertainty about material prices in reinforcement and concrete.

03 Hot topic: sustainability

Sustainability remains high on the agenda in the UK and piling technology can make a significant contribution to the industry鈥檚 efforts to reduce energy consumption. Clients and consultants are continually increasing their interest in this area and contractors are carrying out more of these projects.

One example is geothermal piles: the piles that are already required for the building are used to transfer geothermal energy from the surrounding ground to either heat or cool the building. Steel pipework is fixed within the reinforcement cage and encased in the concrete of the pile, which provides an ideal energy transfer medium.

Some piling companies are also investing in ground-sourced heat pump systems, party by using some of their existing plant. A deep well of about 250mm in diameter is bored to a depth of over 100m, which taps into the natural groundwater. The groundwater can provide cooling in the summer or supplementary heating in the winter. The water is extracted from the well and circulated around pipework systems before being returned to the ground or reused to flush toilets. With other energy-efficient measures, annual running costs of heating and cooling can be reduced by up to 60%, providing significant reductions in energy consumption.

Both of these systems have elements that qualify for capital allowances recovery and, provided the equipment is included on the government鈥檚 energy technology list, it will qualify for enhanced capital allowance recovery, giving 100% tax recovery in year one.

04 Lead times and costs

Lead times for bored and precast driven piles are largely unchanged from last year, standing at about five to six weeks. Costs are shown in the table, right.

The drive toward sustainability has continued to keep piling prices above the general level of construction inflation. Whilst lead times remain steady at 2006 levels, the continued demand for steel globally has ensured that the costs of sheet, precast and concrete piling continue to rise. This trend is set to continue until the global demand for steel subsides

Concrete frames

05 Market overview

The UK concrete sector is worth some 拢5bn a year, with up to 120 million tonnes of concrete being used in UK projects every year.

The concrete market has remained steady over the past 12 months, although reinforcement prices are volatile. Last year, the net material price dropped from a high of 拢375/tonne to level off at 拢320/tonne. However, it had reached a high of 拢450/tonne by the end of 2006.

06 Hot topics

Aggregate tax Gardiner & Theobald鈥檚 tax experts have suggested that aggregate tax may come under review in 2007. Aggregate tax is currently levied at 拢1.60/tonne and has not changed since 2002.

Sustainability

Sustainability is at the top of many people鈥檚 agenda and more and more designers are taking advantage of concrete鈥檚 excellent thermal mass to reduce the amount of energy used in buildings. Demand for air-conditioning can be greatly reduced or eliminated by exposing the concrete frame: the concrete absorbs high temperatures during the day and night-time air is used to cool the building.

A new report from the Concrete Centre, Thermal Mass: Concrete Solution for a Changing Climate, is available free of charge from the Concrete Centre. For details, see www.concretecentre.com.

Eurocodes

The introduction and implementation of the new BS EN 1992 Eurocode 2 Design of Concrete Structures (EC2) remains a significant event for the UK construction industry. It will ultimately supersede all of the UK standards dealing with the design of concrete structures. The general rules are now available from the British Standards Institution.

All British Standards that conflict with EC2 are due to be withdrawn in 2010. However, BS 8110 for Design of Reinforced Concrete Structures may be withdrawn as early as 2008. In common with all EU member states, British public authorities will have to accept EC2 as a valid method of design on major work. Ultimately, EC2 will become the one design code for all concrete structures in Europe.

It has been reported that the use of EC2 rather than BS 8110 may result in a material cost saving of up to 5%.

07 Lead times and costs

The average lead time for in situ concrete frames has remained reasonably static at five weeks. The primary factor in determining the lead-in time remains the procurement of steel reinforcement.

Trade contractors have reported that they can mobilise and be on site in three to four weeks, but the detailing of reinforcement and issuing of bar-bending schedules by engineers tends to lag behind this timescale. These are required 10-15 days before the steel is needed on site to avoid the cost of express ordering.

Costs

The supply price of C40 concrete has risen to 拢70/m3 this month.

Trade package preliminaries covering supervision, setting out and overheads and profit currently stand at 20-25% of the trade package cost.

Typical 鈥渁ll in鈥� estimating rates, inclusive of trade preliminaries, overheads and profit, are listed in the table above. The rates have been expressed as a range to reflect ease of placement, quantity and design complexity.

For concrete reinforcement, typical costs for supply and fixing range from 拢900 to 拢950/tonne.

Many concrete contractors are still unwilling to provide a fixed lump-sum price for reinforcement at tender and are treating it as a prime cost sum, providing the supply price of reinforcement at the time of tender to be adjusted on placement of order.

The price of formwork is largely unchanged, rising only in line with inflation. Typical costs range for basic finish are in the table, right.

Structural steelwork

08 Market overview

Global demand for steel rose by about 9% last year 鈥� almost twice the predicted level 鈥� according to the International Iron and Steel Institute (IISI). Its latest predictions for 2007 forecast a growth rate of 5%.

Asia, and China in particular, has once again dominated the world market for steel, thanks to rising expenditure on infrastructure and the continuing construction boom in India; forecasts suggest steel use in India grew 10% in 2006, while China witnessed a 14% increase.

Steel use in the EU during 2006 was once again strong with the construction and engineering industries leading the way.

As one of the major economies in Europe, the strong recovery in Germany has contributed to the 8% growth in steel use across the EU.

Looking forward to 2007, the strongest growth region will once again be China although the increase will be more moderate. Stronger credit control and administrative measures introduced by the Chinese authorities will cause steel use to grow by just over 10% in 2007 as opposed to just over 14% in 2006. Contrasting these figures with the rest of the world, the IISI predicts a growth rate for steel of just over 5% in 2007.

In the UK there is of course talk of demand associated with the 2012 London Olympics and estimates suggest that the Games will require an additional 300,000 tonnes of steel per year (above our normal 12 million tonnes) until 2010. However when seen within a global context the increased demand for steel generated by the games is a drop in the ocean.

09 Hot topics

Sustainability

The steel lobby promotes steel to potential clients as a more sustainable form of construction that concrete, as it is recyclable, fabricated off site, safe to erect, and so on. Steel producers are themselves being asked to try to run their businesses in an efficient and financially sustainable way, by maximising eco-efficiency of steel construction through its life cycle, promoting recovery, and reusing and recycling steel.

Eurocodes

The new structural codes that will apply across the EU are now published. They will be mandatory for all public works and will become the de-facto standard for the private sector. Currently, civil and structural engineers are deciding when to switch over as they have until late 2009/early 2010. There are no deem-to-satisfy arrangements in the new codes, which follow the continental practice of making calculations to show that a design will be stable. It means that designers will have choice and with this will come opportunities for cost savings 鈥� about 2%, but 7% in some cases.

Olympics 2012

The next big challenge for steelwork is anticipated to be the Olympic Games in 2012. The British Constructional Steelwork Association has been involved in developing an Olympic Charter for procurement, insisting on the use of project bank accounts for all projects for the Games and for a ban on the holding of retentions.

10 Lead times and costs

In regard to lead times the large steelwork contractors are now usually involved for several weeks finalising design and value engineering schemes prior to the commencement of working drawings; however with no early involvement then lead times are typically 12-14 weeks.

Costs

The increase in the global demand for steel has led to significant price increases for all steel products reinforcement bar as well as structural steel sections. Over the past 12 months steelwork material costs has been increasing at a consistent rate of 拢30 to 拢35 per tonne per quarter. Structural steelwork cost circa 拢540/tonne 12 months ago and now costs circa 拢670/tonne; this equates to a price rise in excess of 20%.