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Market overview

In February 2005, when the latest steel review was published, the sector had just gone through a period of all-time high demand. Last year saw a stabilisation of pricing, but global demand is still expected to rise by about 5% in 2006, according to the International Iron & Steel Institute. It said this growth would continue to be fuelled by China despite efforts by the Beijing government to cool its consumption.

Growth in China has also stimulated demand for steel across Asia and steel consumption worldwide is expected to move up over the next five years. The IISI estimates that global demand for finished steel products will be about 1.05 billion tonnes in 2006, compared with 972 million tonnes in 2004. Supply problems are not predicted, however, because all the talk of shortages prompted many buyers to carry larger stocks than previously considered necessary.

In the UK there is, of course, talk of the demand associated with the 2012 Olympics and estimates suggest that the London games will require an extra 300,000 tonnes of steel a year on top of our normal 12 million tonnes during 2006 to 2010. However, when seen within a global context, the increased demand for steel generated by the games is a drop in the ocean.

Hot topics

The China effect

The Chinese economy continues to have a major effect on steel prices and production worldwide. Chinese demand for steel is growing at 20% a year. However, Chinese domestic steel production is increasing at a faster rate, taking pressure off the world market. According to the Iron & Steel Statistics Bureau, imports and exports were equal at 23.2 megatonnes each between January and October 2005. Indeed, because of the rise in domestic production, China may become a net exporter of steel in 2006.

Eurocodes

The introduction of the Eurocodes over the next five years will be the largest single change in codified design in living memory. By the end of the decade the familiar British codes such as BS 5950 and BS 5400 will be withdrawn to be replaced by Eurocodes that can be applied throughout Europe.

Costs

Since the beginning of 2004, the increase in global demand for steel has led to significant price increases for steel reinforcement as well as structural steel sections. The second half of 2005 saw a downturn in prices but they remain at a level significantly higher than at the beginning of 2004.

Structural steelwork cost per tonne

The unit cost per tonne for structural steelwork is made up of the following components, each of which will vary depending on the nature, complexity, location and size of the project:

• Connection design (main frame design by structural engineer)
• Detail drawing
• Fabrication
• Testing
• Treatment and delivery
• Offloading
• Erection.

As a guide, on a "typical" project of a medium size, an approximate split on an overall tonnage rate could be as follows:

• Materials 30%
• Engineering 5%
• Fabrication 35%
• Priming 8%
• Delivery 2%
• Erection 20%

(see tables)

Projects that are less than 500 tonnes may attract a premium of 5% or more on the costs.

Projects that are more than 500 tonnes may see a reduction.

The above costs assume that the structural steelwork contractor will provide its own craneage on all of the examples, with the exception of the office buildings. On offices, a tower crane provided by the main contractor is more likely.

Lead times

Steel construction lead time figures of 10 to 12 weeks are often quoted in journals. The figures usually quoted are in fact "length of order book".

The information that specifiers really need to know is the elapsed time from placing an order to the time of start of delivery of steelwork to site and commencement of erection. Obviously this varies depending upon the size and complexity of the project but, for relatively straightforward projects, the period from receipt of order with full information to start of delivery is typically 9-11 weeks, which are built up as follows:

Working drawings 4 weeks
Approve drawings 4 weeks
Manufacture 3 weeks

Total 11 weeks

Installation

Erection times can vary depending on the location and complexity of the project but for, say, an eight-storey office building, they are typically 1500 m2 of floor area per week using two cranes.

Steel diagrid frames, like this one on London’s Swiss Re, are becomingly increasingly popular because larger clear-span spaces can be created