Steel Prices on the Rise

In response to rising steel prices, the American Institute of Steel Construction Inc. is recommending the inclusion of price escalation clauses in new and existing contracts.

The clauses are needed to ensure that projects are completed without interruption and that the domestic construction industry remains vital and strong, said AISC president Louis Gurthet.

The recent sharp rises in the cost of both domestic and foreign steel have a number of causes, but the biggest impact has come from China's rapid economic expansion and its hunger for raw materials. According to a Fortune magazine analyst, China's steel demand hit 257 million metric tons last year - up from 22 percent form the previous year. It could increase another 13 percent this year.

According to the Associated General Contractors of America, soaring prices for steel threaten the solvency of key contractors. More than a dozen contractors have contacted the AGC recently citing a variety of prices increases, said AGC chief economist Ken Simonson.

In addition to steel, prices have spiked recently for copper (used in pipe and fittings,) wood products (particularly plywood and oriented strand board), natural gas (a key ingredient in PVC pipe, some insulation, and heating and electricity), and petroleum products such as asphalt and diesel fuel (used in off-road construction equipment, highway vehicles and transportation of construction supplies.)

Watching the Bottom Line

State and local tax scrutiny may be affecting many contractors' and developers' bottom lines, according to Grant Thornton's BuildingBusiness newsletter.

The Center on Budget and Policy Priorities reports that 30 states are projecting deficits for fiscal year 2005 totaling $39 to $41 billion. These budget deficits are causing states to turn up audit activity to fill budget gaps. When reviewing state and local taxes, contract wording warrants special attention. General contractors must ensure contracts with subcontractors are worded correctly so the state and local tax is correct.

BOMA/NY distributed its Pinnacle Awards at a Feb. 5 event at the Copacabana in New York, N.Y. Winners were:

• Historical Building: The International Toy Center, 200 Fifth Ave.
  
• New Construction: The Reuters Building, 3 Times Square
  
• Renovated Building: 150 Fifth Ave.
  
• Operating Office Building (100,000 to 499,999 sq. ft.): 717 Fifth Ave.
  
• Operating Office Building (500,000 to 1 million sq. ft.): 420 Fifth Ave.
  
• Operating Office Building (over 1 million sq. ft.): The Grace Building, 1114 Ave. of the Americas
  
• Outstanding Local Member: Angelo J. Grima, portfolio manager, Grubb & Ellis Management Services, Inc.
  
• Manager of the Year (More than 10 years experience): Vincent A. Fantauzzi, RPA, general manager, CB Richard Ellis Real Estate Services, Inc.
  
• Manager of the Year (3 to 10 years experience): Rona Siegel, property manager, Tower Realty Management Corp.
  
• Civic Betterment: New York Cares
  
• Henry J. Muller Achievement Award: Stephen M. Ross, founder, chairman & CEO, The Related Companies
  

Click here for more Association News >>