Steel: what lies ahead for construction’s most expensive material?

The cost of steel rose so steeply this year that even some of the biggest project managers in the country were beginning to feel the heat.

Prices, which had been largely stable at around £350 per tonne, were suddenly hitting levels of between £500 and £700, and even more.

The hike was enough for HS2 chief executive Mark Thurston to warn MPs earlier this year that the mega high-speed rail project would face inflationary risks.

In early October, British Steel’s owner, Chinese firm Jingye, called on the UK government for £500m of support to keep its furnaces in Lincolnshire burning.

A month before, the steel manufacturer had hiked prices of structural steel by a further £150 per tonne – blaming rising energy costs. It came on top of a £100 per tonne increase earlier in the year.

Aecom’s head of cost management and commercial sector, Brian Smith, says fluctuations in the strength of the pound since former chancellor Kwasi Kwarteng’s September mini-budget have affected steel prices. He tells Construction News: “Supply prices of steel components continue to rise, as lagged impacts of past energy-price inflation and the recent depreciation in Sterling feed through.

“However, the traded price of iron ore has dropped by nearly 25 per cent since June, as concerns about the outlook for demand have built amid a weaker outlook for global economic growth.”

The historical prices for steel components across northern Europe, supplied by Kallanish Commodities, show that rebar stayed fairly stable in 2019, costing £483 per tonne in January 2019 and falling to £406 per tonne in December that year.

The depths of the pandemic saw rebar fall to as low as £389 per tonne in August 2020 but, since then, costs have risen. In January 2021, prices hit £585 per tonne and by July that year, rebar was trading at £749 per tonne – marking a 55 per cent increase in 18 months.

The real spike, however, hit between March and June this year, when prices rose to more than £1,000 per tonne on average, peaking at £1,202 per tonne on 29 April. Rebar prices have now fallen back to £859 per tonne, as of 21 October, according to the latest figures available. This is still a 77 per cent increase since January 2019.

The cost of plate steel took a similar journey, standing at £532 in January 2019 and peaking at £1,692 in late April, before standing at £959 per tonne as of 30 September this year – an 80 per cent increase on January 2019. 

But what impacts have soaring steel prices had on the construction sector?

Richard Warren, head of policy and external affairs at UK Steel, says the representative body has observed a slowdown in the use of steel by the private sector in the UK. “We have seen order books drying up and people are not seeing the types of projects come through that they would expect,” he says.

“This is all relative, but order books for the first half of 2023 are looking diminished. It’s not looking buoyant, and we have not quite got back to the levels of steel demand we had pre-pandemic.”

Structural steel is such a key component of large-scale construction projects in the UK that the impact of price rises is arguably unavoidable. But Aecom director Jon Leach says architects and engineers have managed to adapt their plans to counteract increased costs for the material.

“Significant steel-price escalation has made taking a structure-led approach to design more desirable,” he says. “Minimising the amount of steel – or materials generally – in a building’s structure can have big cost and carbon savings.

“As clients became more carbon-conscious, structure-led design was already increasingly popular and recent steel-price inflation broadens the appeal.”

Leach says that reuse of steel has become more desirable both from a cost and ecological perspective. Big efficiency savings can also be made in the design stage, he adds.

According to Warren, from a steel manufacturer’s perspective, they have not seen people look to design steel out of new buildings. But he “doesn’t rule it out” in the future.

“If there are viable alternatives to steel being used in construction in the future, probably for environmental reasons, it may happen,” he says.

Warren notes that other countries use steel in vastly different ways. He says: “In the UK, you get massive demand for heavy sections. But if you go to France or Australia, it’s all concrete buildings, so there’s very little demand for heavy sections and a massive demand for rebar.

“Australia has something like twice the demand for rebar than the UK, even though it is a much smaller market.”

He adds that he expects to see more use of offsite prefabrication and modern methods of construction in steel projects in order to make the use of the material more efficient.

“Engineers and design teams need to be more aware of the implications of their early stage decision-making,” he says.

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