Structural steel fabricators were passed by when the U.S. offered protection from cheap imported steel by placing tariffs on some flat-rolled steel products last March, including a 30% tax on steel plate and 15% on reinforcing bar. This leaves U.S. structural fabricators still facing stiff price competition from foreign firms just as the downturn in the commercial markets puts a squeeze on their backlogs.

"We're dead in the water," says Alan L. Humbard, purchasing manager for Portland, Ore.-based Fought & Co. Inc. "I've been in this business 35 years and this is the worst [business climate] I've ever seen." In addition, he anticipates severe price drops on flange steel. "Our industry is absolutely struggling right now and that's got to create pressure on prices."

"Four-fifths of our problems have to do with the economy in general," says Humbard. "But we also have a terrible problem in this region with Canadian fabricators. With the exchange rate, we can't compete with them, and that's been a real problem for us."

In the Northeast, Canadian fabricators are grabbing most of the high-profile projects such as stadiums and arenas in Philadelphia, Pittsburgh, Detroit and Boston, as well as most large commercial buildings in New York City. In addition, domestic fabricators in the region say Canadian firms have virtually taken over the school construction market in some states.

The strong U.S. dollar gives Canadian fabricators about a 40% cost advantage in shop labor. In addition, Canadian firms have access to cheaper Japanese and Korean steel, which a 1999 U.S. tariff denies to domestic fabricators. "They can buy steel for around 13¢ per pound, and we are talking in the high teens for domestic fabricators," says Jim Stori, president of STS Steel Inc., Schenectady, N.Y.

Complicating matters on the West Coast is the fact that some of the biggest steel projects there are being built with foreign steel. Ironworkers and Pacific Northwest steel producers appeared before the Washington State Transportation Commission in May to express their objection to a plan by Tacoma Narrows Constructors, a Bechtel Enterprises/Kiewit Pacific Co. joint venture, to import more than 60% of the 40,000 tons of steel it will take to build a new $800-million, 2,800-ft suspension bridge across the Tacoma Narrows. The bridge is being built under the state's public-private partnership program under a negotiated contract with no federal involvement. The construction team, therefore, has no obligation to use domestic steel.

The issue has become part of final negotiations between the construction team and the Washington Dept. of Transportation, but transportation commission administrator Christopher Rose says it is unlikely the state will force the contractor to "buy American." To do so, says Rose, would add $30 million to $40 million to the cost of the project. "The legislature has authorized an $800-million bond issue and construction costs are capped at that level," says Rose. "We don't see any way to change the steel purchase and still stay within the $800-million cap."

The Tacoma Narrows purchase agreement comes on the heels of a decision by the Bonneville Power Administration to import foreign-fabricated tower steel, produced in Spain and Italy and fabricated in Mexico and Brazil, for an upcoming transmission project that is the largest in the Northwest in nearly 50 years.

BPA's 800-mile transmission project will consume 40,000 tons of tower steel. "After a dramatic market slowdown in the last decade, most U.S. manufacturers have left the tower steel business," says Vickie VanZandt, vice president of operations and planning for BPA's transmission business line division.

"The U.S. fabrication industry is taking a huge hit," says Richard L. Zampa, president of the five-state Ironworkers District Council of California and Vicinity. In Zampa's backyard, the joint venture team of FCI Constructors Inc. and Cleveland Bridge California Inc. is looking to save 30% of its steel costs by pre-fabricating box girder segments for the new Carquinez Bridge, scheduled to open in November 2003. "High-rises are using more and more foreign steel. Container cranes, which we used to build on site, are now all being built offshore," says Zampa. "We've pretty much lost this battle."

SPECIAL REPORT: Second Quarterly Cost Report: Summary: Commercial Slump Slams Prices

SPECIAL REPORT: Second Quarterly Cost Report: Lumber: Prices Staff After Brief Rally

SPECIAL REPORT: Second Quarterly Cost Report: Equipment: Sales Slump Flattens Prices

SPECIAL REPORT: Second Quarterly Cost Report: Compensation: It is Now a Buyers' Market

SPECIAL REPORT: Second Quarterly Cost Report: Labor: Wage Hikes Gain Momentum