Steel Shortage Slows Country’s Construction

February 27, 2004

CHINA’S construction of a massive dam, measuring more than one and a half miles wide and 600 feet high, several large public works projects in preparation for the 2008 Beijing Summer Games and additional factories for the country’s rapidly growing industrial sector, have caused a worldwide shortage of steel and other construction materials, according to industry sources.

In Costa Rica, the shortage has increased steel prices and reduced overall construction here, according to the Costa Rican Construction Chamber.

The international price of steel has increased 40% since January 2003. In recent months, the increase in steel prices and decrease in availability in Costa Rica has caused the price of steel construction rods (varillas) to nearly double.

The increase in the cost of the rods is the main cause of a 30% drop in construction here during the month of January, according to the Costa Rican Construction Chamber (CCC).

IN Costa Rica, the steel rods are required by law for the construction of homes and buildings.

“Steel rods are an essential element of construction. The country’s Construction Law and Seismic Code require that we use rods. We are not allowed to use substitutes for steel rods,” Chamber director Randall Murillo told the Tico Times.

“We’re trapped in a straight jacket,” he said. “We can’t use other products because there aren’t any. We can’t substitute the rods because the law won’t allow it. We can’t go on the foreign market to buy steel because of the high [14%] tariffs set up to protect the local industry.”

The shortage led CCC to issue a statement last week asking the Economy, Industry and Commerce Ministry (MEIC) to temporarily lower the tariff on steel imports.

TO prevent future shortages of steel and other construction materials, MEIC’s Commission for the Promotion of Competition is conducting a study on the prices of steel rods in Costa Rica and the international shortage of steel.

The study’s main objective, however, is to analyze the market and make sure local companies are not engaged in anticompetitive practices. If such practices are found, MEIC will take corrective actions and punish those responsible.

“The goal of the market study is to analyze whether or not situations that can hurt the consumer, such as abusive price fixing or shortages, exist,” explained Gilberto Barrantes, Economy, Industry and Commerce minister.

If the results of the study show that conditions are detrimental to steel consumers, the Ministry will take action to counteract the market distortions.

Measures could include the reduction or temporary elimination of steel subsidies.

TO replenish the country’s supply, a boat carrying 12,000 tons of steel bought by Laminadora Costarricense, the country’s largest producer of steel rods, arrived in the Caribbean port of Limón last Friday.

The ship, which was supposed to unload at 10:30 a.m., did not unload until 6 p.m. as a result of a work stoppage by Atlantic Port Authority’s (JAPDEVA) workers. Dock workers were protesting against a recent Comptroller General’s Office decision eliminating public funding for many additional expenses workers’ had been receiving as a result of collective bargaining agreements.

The Economy Ministry remains confident the shipment will satisfy the country’s steel needs during the following months.

“National providers have taken the measures necessary to replenish the local market,” Barrantes said in a statement.

“This ensures a permanent supply of steel during the coming months.”

ALTHOUGH pleased the shipment had arrived, the Construction Chamber this week stressed the need for the government to develop a permanent strategy to prevent similar shortages in the future.

“The construction industry, as consumers of the product, require that the necessary decisions be taken to solve these types of problems in a short period of time and make sure similar situations never happen again,” Murillo explained.

“Preventive measures must be taken. The authorities are the only ones who can make these types of decisions.”

Murillo said he is hopeful the government will find a solution that will prevent additional material shortages. He highlighted the important role construction plays in the Costa Rican economy.

“A country like Costa Rica can’t afford the luxury of stopping construction for two to three weeks,” Murillo said.

“We receive a lot of foreign investment and have a great deal of housing construction, much of which is public interest. The shortage halted the momentum the sector had coming into this year (TT, Feb. 6). The drop in construction led to the firing of many workers. The government must guarantee this won’t happen again,” he said.

 

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