Getting by with scraps: Construction woes hit steel industry
 |
|
||||||||||||||||
The U.S. economy is supposedly coming out of a short, shallow recession.
Tell it to people who work in the Duwamish Waterway area.
A slowdown in office-building construction that began with the dot-com crash two years ago is still rumbling powerfully through the steel mill and distributors in Seattle's industrial corridor.
Steel companies report sales fell 20 to 40 percent in volume in 2001, as builders put new projects on hold and cut back on existing ones. Employment is down as much as 60 percent at some firms.
Bloch Steel Industries, which was established here in 1938 when much of the area was unpaved, enjoyed a boom in the late 1990s as construction soared. Now, fewer trucks thunder up rutted Colorado Avenue South to Bloch's mustard-colored office building and warehouses.
A battered chain-link fence surrounds the company's lot, which holds a mound of scrap steel — clothes racks and other junk too twisted to recognize. A crane picks at the pile with a giant claw, pulls out metal and drops it into the "shearer," a set of jaws that snaps the scrap to pieces so it can be fed to furnaces at Birmingham Steel a few blocks away on Southwest Andover Street.
Leo Bloch, the 88-year-old chief executive, peers out his window at a truck backing into the yard. Its bed holds rusty railroad track — a load of gold in the scrap business. This high-carbon steel is too strong for the shearer. Bloch pays men $14 an hour to cut it up with torches for Birmingham.
But deliveries like this are rare these days. With construction down, there's less scrap around for Bloch to sell, less for Birmingham to melt, less demand for new steel from the mill.
A few blocks north at Seaport Steel on East Marginal Way South, business is much the same. Seaport doesn't have a scrap pile, but its "lumberyard of steel," as owner Lawrence James calls it, is getting fewer calls to cut, split or bend beams and pipes to suit customers.
New buildings — and the steel to make them — just aren't needed with so much vacant office space around. Businesses also are consolidating and selling surplus space.
Boeing put 12 buildings on the market last month, a total of 2 million square feet, as it slims down and cuts 22,000 jobs in Washington state. Technology Tower, a 20-story building in Bellevue, was put on hold last May.
Earlier this month, Immunex, the drug-research company, scaled back plans for its $750 million headquarters on the shores of Elliot Bay. Instead of 1,200 people, the research facility will hold about 400, as jobs move to California where Immunex's new parent, Amgen, is based.
"We sell steel for those buildings," says Bloch. "We certainly will see an impact from Immunex."
Sept. 11 prompted further caution among builders. Many went through the toughest few months they've seen in decades after the terrorist attacks.
"Many building projects went on hold," Bloch says. "We had a very bad fourth quarter." Bloch has cut employment to about 43 people from 60, mostly through attrition.
Project values plunged
It was an abrupt downturn. Construction in the Seattle area boomed in the late 1990s as high tech fueled a roaring economy. But in 2000, the value of projects approved in Seattle plunged 42 percent. It climbed in 2001, but was still down 18 percent from 1999 levels.
Manufacturing took a big hit. The Seattle area has lost 15,600 factory jobs in the past year. That number captures about 7,000 Boeing layoffs, and 13,000 more are due by year-end.
No one sees the Duwamish manufacturing sector pulling out of the recession soon, no matter what the national economy does. "As long as there's a lot of open space to lease, you've got a time lag before there's new construction," says James of Seaport Steel.
While there are signs that industrial output and consumer spending are improving, "it's going to be probably through this year before anything turns around," he says.
Prices are falling, too, under pressure from slackening demand and foreign imports that have undercut the industry.
A recent decision by the Bush Administration to impose tariffs on steel imports has helped some but has left large swaths of the industry untouched.
The tariff has prompted a flurry of orders, as builders took on a little extra supply for their projects before the tariff forces prices up.
The tariff provides no help for steel pieces that are fabricated — or put into finished form — abroad. Nordahl MetalFab in Puyallup is one of several U.S. fabricators that recently lost a sizable order to supply 4,000 tons of steel to a military hospital at Fort Wainwright in Alaska and another at McCord Air Force Base in Tacoma. Both contracts went to South Korean firms, says Dick Nordahl, the company president.
The Alaskan job was "enough work for 20 men for a year," he says. Fabricators lobbied for protection under the tariff, but were rebuffed. "They saw no evidence of a negative impact. We're seeing a lot of impact."
Nordahl says he's cut his work force to about 6 from 23 during the peak a few years ago.
Birmingham Steel, which makes new steel from scrap, cut its output to 50 percent of capacity last November, during the worst of the downturn. That's climbed to about 75 percent now.
Eddie Lehner, vice president and general manager, cut employment about 5 percent, then reduced hours of its remaining crew by about 25 percent to keep workers on the payroll.
Lehner sees some positive signs on the horizon, including a backlog of projects that will probably get started after employment improves. Government spending is likely to drive the early part of a recovery, as construction starts on Sound Transit's light rail and road building, if voters approve a new gas tax.
But there isn't a critical mass of work, and things aren't likely to pick up for six to nine months, Lehner says.
What's more, he isn't sure the recent gains in industrial output are much more than companies restocking depleted inventories.
"We're not seeing sustained demand, which is what we're going to need to sustain this recovery," Lehner says. "Business investment (in new buildings) is still very weak."
Scrap supplies down
Less construction also means less demolition, which is a key source for scrap metal that feeds the steel mill.
It's a big reversal from the good times. And foreign competition is being felt. After the 1997 Asian financial crisis, South Korea and other countries started selling more steel in the U.S. market, says Bloch President Joel Richards. It hurts a lot more now that Washington is in a recession. "Our economy was so strong that even with them dumping it didn't really affect us until last year," Richards says.
So businesses are surviving by cutting costs and finding market niches.
Bloch Steel has installed computerized cutting tables that can trim huge sheets of metal as much as 12 inches thick into jigsaw pieces. Typically, these custom cuts are used as base plates and connectors on everything from plumbing and ventilation systems to huge structural beams that hold up buildings.
Today, artists and wealthy folks come to Bloch for custom-cut steel for art projects or their homes. They haul it away in Range Rovers.
"We accept small orders," says Bloch.
Alwyn Scott can be reached at 206-464-3329 or ascott@seattletimes.com.