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Steel: Fragile optimism begins to emerge following traumatic recession

The steel market remains challenging, but contractors are reporting an easing of conditions and growth in both order book size and visibility.

Following a brutal few years, dogged by cut-price bidding and retrenchment which saw many companies reduce capacity and move to single-shift patterns, fragile optimism based on strong enquiry levels - particularly across the industrial sector - is beginning to emerge.

Though turnovers are generally slightly higher, the high-profile administrations of Rowecord and S Robinson in recent years have rocked the market, while the top four continue to operate in the red.

At the top of the table, ranked by turnover, is Severfield-Rowen. The group’s Severfield-Watson Structures business is being reorganised, and Severfield is reducing capacity across the business. Although the firm says its order book is slightly smaller than expected, it expects improvements into 2014.

Range of issues remain

There is cautious optimism regarding the amount of work coming to market, but concerns remain about tight margins, tenuous orders, rising material costs and clients creating uncertainty by holding off putting contracts to bed.

“Although projects appear to be there, they take forever to come to fruition,” says Billington chief executive Steve Fareham.

“There is a little bit more sense and reason coming back, a general increase in stability in pricing terms, although there are still and always have been rogue prices out there below the cost level,” he adds.

“We have now gone back to a situation where we are booking work next year as well - we haven’t seen that for a couple of years.”

Trickle-down confidence boost

The infrastructure and rail sectors are said to be regaining strength, along with the retail and residential markets. Offices still lag but contractors hope the pick-up in other markets will boost confidence among the risk-averse commercial clients.

“The market has now started to realise that you get what you pay for”

Sarah McCann-Bartlett, BSCA

British Constructional Steel Association director-general Sarah McCann-Bartlett agrees the market is on the up.

“We think that structural steel consumption in 2013 will probably be down another 1-2 per cent on 2012,” she says. That level would still be nearly 45 per cent below peak 2007 levels, but it is expected to gradually increase in 2014.

Change in order books

This growth, Ms McCann-Bartlett says, is down to an industrial market that was “leading the way” for a general “firming of the market”.

This also spells fewer headaches for contractors, she adds, in the form both of fuller - albeit shorter - order books, but also through more reasonable pricing levels.

“The market has now started to realise that you get what you pay for,” she says. “Final negotiations have been very difficult and it had been very difficult to get paid.”

This was partially driven by regulation changes, which will require CE marking and new quality requirements applying to fabricated steel from July 2014.

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