Understanding the Cost of Materials in the Steel Industry

Published by on September 24, 2014 9:31 am

Understanding the Cost of Materials in the Steel Industry

One of the costliest components of a new structure is often the steel foundation. Steel, LLC is one of the nation’s leading steel fabricators, and we would like to walk you through the materials process so you have a better understanding of how you can reduce costs.

In order to see where you can save on your next project, you need to understand the industry process. There are four distinct components of the structural steel supply chain:

  • Producers
    mills which manufacture structural steel products
  • Service Centers
    function as the warehouses and provide limited processing of structural steel before it goes to the fabricator;
  • Steel Fabricators
    physically prepare the steel, as well as distribution; and
  • Erectors
    those who assemble the steel into a frame on the construction site.

These four groups of people have an enormous impact on the supply chain, obtaining the materials from your detailed construction documents and delivering those materials to your construction site. The way in which they handle these materials can have a direct impact on the cost of your project.

Sixty-five percent of all American steel is currently processed through the service centers.  There are more than 1700 steel fabricators in the United States, and these fabricators can choose to order directly from the production mills, but this requires a longer waiting period.  Service centers generally have two to three months of inventory in stock on the floor and can even assist with cutting and distribution, saving that effort from the fabricator. Ordering directly from the mills can be more cost effective, but only if you have the time to wait and the fabricators can assist with preparing the steel for assembly onsite.

Of your steel package costs, 70% is in labor and distribution. The price of the material represents only 30% of your overall cost.  The greatest cost-saving efforts should be focused on reducing assembly errors or changes, and remembering that least weight is not least cost. The price of the material is not nearly as impactful as the way that you are assembling the building. If you can make your builder’s job easier by simplifying connections and creating repetitions within your structure, you can save profoundly on labor costs.