Steel prices started to skyrocket early last year, and although they seem to be stabilizing now, local companies expect to feel the impact of higher materials costs for some time to come.

Robert Cramer, the president and chief administrative officer for Cramer & Associates Inc., a Des Moines bridge-building company, said the high cost of steel resulted in a decline in profits for his company and changed some of the ways his business operated. Cramer & Associates has been working on the Interstate 235 reconstruction project for the Iowa Department of Transportation since early 2004.

“When we’re bidding, we do that based on what we’re paying at that time,” Cramer said. “When the steel prices rose quickly, like they did early last year, we got burned,” Cramer said.

“The (steel) mills won’t hold their prices for anybody,” Cramer said. “You get a quote one day, and by the time you make your order the next day, the price has gone up. When prices went up for our H-pilings, we ended up eating the difference of $30,000 between the estimated and actual cost on the first phase of the University Avenue bridge.”

When construction companies must absorb increases in materials costs, it may not be practical to try to recover those losses on other projects, Cramer said.

“You can try to bid higher on the next job, but you might lose out on it then to a competitor,” he said.

But Cramer said his company was lucky with its structural steel because it had locked in prices with its supplier a couple months before steel prices started to surge in January 2004.

“When the cost of steel from the mill went up, our supplier paid $370,000 more than what they had planned, and that was just one job of theirs where they ran into this problem,” Cramer said. “That kind of loss over and over again would have wiped out a smaller company. This company absorbed the loss, but after that episode, that company would no longer guarantee its price.”

Because the supplier no longer guaranteed its prices, when the second round of bidding was done in late 2004 for the current work on the University Avenue project, Cramer & Associates had to go with a company that charged more but would stand by its price.

“When we bid this project, which was last August, and Industrial Steel would no longer guarantee their price, we had to go to the next bidder, which was $400,000 higher than the low bidder.”

Fred Muller, a steel buyer for the Clive-based Wittern Group Inc., which manufactures vending machines, is glad to see prices stabilizing for the steel parts he buys. Last year, certain parts he ordered tripled in price, and his company, like Cramer’s, chose to absorb the cost instead of implementing price increases.

“It’s a little better now,” Muller said. “I had paid 41 or 42 cents for certain parts, and they’ve rolled back about 20 percent since last year so that I’m in the mid-30s now. Here in the Wittern Group, we tried to absorb as much of the higher costs that we could because the vending machine business is very competitive, and because many of the machines do similar things, price is a major part of the customer’s decision.”

Muller said Wittern’s production continued at its normal pace during the steel shortage, but it was sometimes difficult to get the parts he needed, and he did not like being at the mercy of the suppliers.

“Availability was a problem last year as well,” Muller said. “A lot of my suppliers were dried up because the automobile industry and construction industry were doing so well at the time. We were scurrying at times to get enough of what we needed. It was challenging because I felt that I didn’t have any leverage. The guys I buy from had the upper hand, and now it’s starting to improve so that 2005 looks to be a better year.”

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Since early last year, contractors and manufacturers have felt the pinch of higher costs for materials, particularly steel. Iowa companies such as appliance maker Maytag Corp. and office furniture and hearth products manufacturer HNI Corp. have announced or implemented price increases this year for some of their products in order to recover lost profits.

According to the American Iron and Steel Institute’s Web site, www.steel.org, the price of steel reached a 24-year high in the third quarter of 2004. Since September, steel prices have been declining, but are still double what they were in June 2003. In addition to steel costing more than it did a couple of years ago, a booming commercial construction market in China made some steel products harder to find.