10:00 AM, 10 October 2017

The Challenge of imported steelwork

The announced liquidation of Christchurch fabricated steelwork importer Challenge Steel highlights the risks associated with delivering steel structures into the most challenging market – steel construction with seismic frames.

New Zealand has learnt its lesson through a string of serious earthquakes. Putting an innovative and finely tuned design and regulatory frame work in place, to deliver  designed-in seismic performance.

However, achieving compliance requires reliable product supply and a highly skilled team. The effort and oversight required to get overseas suppliers who run varying fabrication systems (often using different material standards) is considerable. And, as this liquidation may indicate - can end up costing significantly more than budgeted.


Meeting local demand

Following the Christchurch earthquakes and unsubstantiated claims that local steel construction fabrication capacity couldn’t meet demand, local builders started exploring  imported options. Today there’s no significant steel building going up in New Zealand that hasn’t considered this in its tender process. 

Acutely aware of the risks associated with fabricating complex seismic resisting steel frames; we advised our industry of the risks in our 2014 HERA Advisory Notice “What You Must Know If Considering Importing Seismic Resisting Fabricated Steel Structures” - a resource still available today. 

This explains in lay person terms why it’s crucial that fabricated steel conforms to specification. As being outside can mean seismic elements may not perform as intended. Dimensional, strength, ductility and toughness requirements of steel used need to be matched with the performance of welded connections - as mismatch can lead to catastrophic failure. Take the simple load case of a base plate in a seismic frame which transfers the seismic loads from the column into the foundation via crucial welds that haven’t got the right properties. You can imagine how its failure will affect the structure’s performance! 

Steel structures on first principle are straightforward and material grades and welded connections can be well identified. This allows easy on-site inspection and, if required, identified defects can be fixed and non-complaint materials replaced. However, repairing defects on site versus the workshop is difficult and usually costs several times the original fabrication cost. The defects first need to be removed, nonconforming materials replaced, and follow up actions such as painting an addition.

If steelwork is imported, the ease of the original fabricator repairing is lost. This also places our local fabricators in the difficult position of repairing products they feel compete directly with theirs. Add to this cost penalties from construction delays and exponential remedial work – is it really worth using imported steel?

The press release states that quality was not an issue in the project which involved Challenge Steel and we believe this is likely the case. We understand that inspection companies engaged included local companies and building authorities familiar with New Zealand’s requirements - as a result, we assume what has been passed as complying likely is to specification. However, based on our wide experience with imported fabricated steelwork from low cost countries such as China, we believe quality issues likely were a key factor in getting it right and added to the cost escalations leading to liquidation.

If given a level playing field – New Zealand construction can compete!

At HERA, we believe that risks associated with imported steelwork need to be well understood and considered when preparing tenders. If this is done properly - local and imported solutions are closer than thought. 

Our analyses of the cost of imports supports this. Showing that if product conformance is achieved with steel procured from fair and conforming sources and fabricated in modern and highly automated local workshops means there’s only a marginal difference in cost and this also puts the importer under cost pressure. In fact, it’s likely that imported fabricated product used by Challenge Steel in their Christchurch projects such as the Health Research Education Building, library, MedCar building and Airport Novotel, or Auckland’s Alexander Park apartments may not have had the margins required to compensate with their additional cost of QA and repairs.

It’s also understood that delays to supply also adversely impacted construction, preventing developers and property owners to gain an early return on their investment. Hence their current financial situation.

With all of these barriers in mind. Surely having a local fabricator able to identify and solve problems on the ground is the better choice for local projects and especially those funded by local rate payers and government! This ‘peace of mind’ should more than make up for the slight cost variation our analysis has identified!

The importance of New Zealand’s steel fabrication and our certification

Since our inception, we’ve been a key driver for research and development in seismic resisting steel construction. Together with our many steel construction industry partners we’ve evolved an innovative and cost effective constructional steelwork design and fabrication system which, as shown in the recent Canterbury and Kaikoura earthquakes, is delivering well performing steel-framed buildings.

Funded by local industry and support of SCNZ, we’re also providing an extensive training and certification framework for our members and stakeholders. That’s why we’re pleased that over 30 of our fabrication members (representing 80+% of our local steel fabrication capacity) are now SFC scheme certified.

In taking these steps, our stakeholders are able to benefit. There are less construction delays from locally fabricated buildings and early investment return, the local economy secures better jobs and improved trade balance; and building users are more confident in the quality of their building. And for our industry - whether designer, responsible project engineer, fabricator or inspector, we’re able to sleep at night knowing we’ve followed the requirements of our building regulations.

Never underestimate the risk of imported steel

The liquidation of fabricated importer Challenge Steel will have massive implications in terms of time delays and additional cost - particularly for Christchurch projects. For us, the likely root cause was an underestimation of the risks associated with importing fabricated steel from places unfamiliar with the complex requirements of steel structures designed to New Zealand seismic performance requirements.

This no doubt highlights the benefits a credible local supply chain such as the SFC scheme certified fabricators can bring. But, also that we need to work tirelessly to consistently meet the requirements of our regulations and lead by example. 

More work is needed in the product conformity assessment space and continued advocacy with government to ensure regulations are met and that international trade is fair and equal.

 

Want to discuss this further?

If you’d like to share your thoughts, feel free to contact our Director Wolfgang Scholz on wolfgang.scholz@hera.org.nz or by phone on +64 9 262 4848.