Western builders steel for higher costs

August 30, 2018

Home builders and developers in B.C. and Alberta are bracing for higher material costs as the federal government threatens to widen the trade war on steel imports and lumber prices soar, partly as a result of massive wildfires.
Due to new U.S. tariffs the price of steel rebar—a key building component in concrete condo tower construction—increased 58 percent as of this August compared to a year earlier said Anoop Khosla, president of Surrey, B.C.-based Mid-Valley Rebar Ltd. and regional chair of the Canadian Coalition for Construction Steel (CCCS).
Half of all construction rebar comes from the U.S., with the remainder from Asian countries. Aside from a small Alberta facility, the rest of the steel used in western construction is sourced from mills in Ontario and Quebec.
In May, the Trump administration slapped a 25 per cent tariff on Canadian steel exports. On July 1 Canada retaliated with matching tariffs on U.S. steel. The federal government is currently in consultation with stakeholders in an effort to prevent Asian steel being “dumped” into Canada as the trade war continues.
The consultation ends August 29 and a federal decision on further tariffs on steel imported from such sources as Malaysia, Indonesia and Singapore is expected on September 4. Steel distributors note such countries are popular not only for lower steel prices but because at about $35 per tonne, it costs much less to ship steel from offshore locations than it does to pay $170 per tonne to haul it from central Canada steel mills.
“The higher steel costs would add from $8,000 to $12,000 to the cost of a 600 square foot condo,” Khosia estimated, based on calculations by CCCS members.
It is not only steel. The price of B.C. 2x4 construction lumber has increased 25 per cent so far this year compared to 2017, and plywood panels are up 22 per cent according to federal government data. Future price hikes are feared due to the more than 400 forest fires currently raging across B.C. and Alberta.
Construction wages in B.C. have increased 10 per cent over the past three years according to a report from the Independent Contractors and Business Association of B.C., which is forecasting a further 10 per cent hike by 2020.
Steel suppliers believe the higher input costs will hit the entire Metro construction industry, especially those building on speculation.
“Some developers are facing real financial difficulties because lenders think there is more risk in the market right now,” said Martin Gobin, president of Heritage Steel Sales Ltd., which has 150 staff at its Langley facility handling dozens of construction projects every year.