Soaring stainless steel prices cripple projects

Surcharge on 316 stainless steel soars from US $400 to US $2200 per tonne in two years.

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By  Sean Cronin and Colin Foreman Published  July 16, 2005

Contractors in the Gulf are being hit by a massive increase in the cost of high grade stainless steel. While structural steel and rebar prices have cooled from last year’s historic highs, the surcharge on ‘316’ stainless steel has rocketed to over US $2200 per tonne from just US $400 per tonne two years ago. The price inflation is adding millions of dollars to the cost of several high profile projects throughout the region. The product is often used on desalination and petro-chemical projects because it is highly resistant to corrosion. It has also been specified for the cladding on the Burj Dubai tower, but designers are now understood to be reviewing the design as it has more than quadrupled in price since the project was first announced. Many contractors are now trying to source alternative products for their projects, but some clients are insisting that the costly material is used. “Nobody is buying 316 grade stainless at the moment because the price of the components that go into it are sky high, so there is a massive surcharge on that particular grade,” says Lance Brown, general manager, Corus Middle East. The component responsible for these sharp increases is the metal element molybdenum, which has jumped up in price from US $14 000 per tonne in July 2003 to roughly US $80 000 per tonne this month. According to Brown, “Everyone is really confused with what is happening to the price of molybdenum.” Molybdenum is used as an alloying agent as it enhances the strength of steel, making it harder and more resistant to attack by various chemicals, as well as increasing its melting temperature. In the Middle East, 316 grade stainless is used in highly corrosive environments like petrochemical facilities. In the construction industry it is used for various applications, ranging from reinforcing bars to exterior cladding. It is also used on many MEP jobs — particularly desalination plants. “Anywhere you have cooling towers, it’s generally not accepted to use galvanised metals, so stainless steel is usually used. If it’s brackish or saline water, 316 grade stainless will be specified, so the escalation [in price] is having an impact,” says Dr Gareth Lucken, operations and engineering manager at Drake & Scull. He added: “For items like plate exchangers the price has increased by 10-15% on the back of rising material prices, and there have been issues of availability, too.” The metal is becoming increasingly popular because of its performance. “It’s an exotic grade and it commands a substantial premium, but the usage of 316 is rising rapidly,” explains Brown. The recent price inflation means that many contractors have taken big hits on projects because they have been unable to source 316 stainless steel at the price they have included in their original tenders.

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