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'Powerful' demand for steel: demand for structurals and other types of steel in energy-related construction projects is so strong that mills and service centers are relatively insulated from the effects of the housing slump.

Article Excerpt
DESPITE THE STRUGGLING HOUSING market, other more steel-intensive construction sectors are doing well, particularly energy-related industrial building, which by some estimates is seeing an astounding 60 percent growth rate.

While observers fear that some types of commercial building will eventually be dragged down by the weakness in homebuilding, most agree that construction of industrial structures, especially energy-related ones "without roofs" such as oil rigs and wind towers, will continue to skyrocket. This is good news for steelmakers, says Peter Wright, director of marketing for Chaparral Steel Co., Midlothian, Texas, who notes that while steel accounts for about half of all materials used in traditional nonresidential construction, industrial structures are virtually all steel.

Overall, nonresidential construction spending, including industrial construction, was up 14 percent in the first quarter of this year vs. first-quarter 2006, says Ken Simonson, chief economist for the Associated General Contractors of America, Alexandria, Va., who expects that trend to continue. Supporting this view is recent information from Reed Construction Data, Norcross, Ga., which shows that the value of nonresidential construction starts for the first four months of this year were up 23 percent in spite of weak growth in highway construction and paving.

The breakout between the industrial sector and traditional nonresidential construction is hard to distinguish as the two overlap, and statistics from the two leading construction consulting firms--Reed and McGraw Hill Construction--vary wildly. McGraw Hill's construction data unit, formerly known as F.W. Dodge, places nonresidential construction growth at a much lower rate.

Wright believes that the growth rate for traditional nonresidential construction markets, on a square footage basis, will decline throughout 2007, possibly ending up at near zero growth for the year, while industrial construction will continue to surge at a 60 percent pace.

"Industrial demand caught a lot of people by surprise," says Jim Wrohle, sales and marketing manager for the structural steel and rail division at Steel Dynamics Inc., Fort Wayne, Ind. "We were shipping way beyond what nonresidential demand would suggest. We now realize that it was actually powerful industrial demand."

"Powerful" is an apt description of steel demand generated largely by energy-market projects such as structures for oil...

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