October 13, 2009

LMS REINFORCING STEEL GROUP

LMS and its competitors have had a wild ride with steel prices over the last couple of years.

FOCUS | STEEL

LMS Reinforcing Steel Group rides construction boom and bust

BRIAN MARTIN

correspondent

It started with two guys and a pick-up truck. It is now one of two companies that dominate the rebar steel sector of the B.C. construction industry.

The company is LMS Reinforcing Steel Group, a local firm with a head office in Surrey.

Sharing the top of the market with LMS is Harris Rebar a division of the Harris Steel Group.

LMS, which until fairly recently was known as Lower Mainland Steel was founded in 1987 by two iron workers, Ron McNeil and Ivan Harmatny – both of whom are still very actively involved.

At that time the two were only placing rebar.

In 1998 they expanded into fabricating as well.

From there, LMS quickly expanded.

Joining LMS recently as chief operating officer was Norm Streu, who is well-known in B.C.’s construction industry.

Before joining the team at LMS, he headed the Construction and Engineering Law Department at Alexander Holburn Beaudin & Lang, a Vancouver law firm.

He is also a past chair of the Vancouver Regional Construction Association and a past director of the B.C. Construction Association.

Streu chose an interesting time for a career change.

The steel industry was knocked on its heels by the drop in construction brought on by the 2008/2009 collapse of the world’s financial industry.

LMS was forced to cut its workforce by close to half – down to around 300.

Around 150 of those were temporary foreign workers, who returned to their home countries.

Now that the market is recovering, Streu said they will likely miss those workers.

“We already anticipate there is going to be a problem with labour shortages coming up,” he said.

“We’re getting busy again and have hired between 50 and 60 guys in the past two weeks.”

One of the reasons Lower Mainland Steel changed its name is its market.

It is reaching much further than it used to for work and is operating right across Western Canada.

To serve Alberta and the Prairie provinces LMS has opened a new totally enclosed 25,000 square foot facility in Southeast Calgary.

Currently, they have some 50 projects underway in B.C. and 20 in Alberta.

They are also doing a major transit train tunnel in Winnipeg.

Any business that depends on worldwide commodity prices is not for the faint of heart.

LMS employs a full-time steel broker, who spends his work day on the telephone calling right around the globe getting prices.

LMS and its competitors all had a wild ride when it came to steel prices over the past couple of years.

“The price of steel was escalating rapidly during the boom and hit some pretty dizzyingly highs in 2008,” said Streu.

“When the wheels started coming off the cart in September of 2008, it fell dramatically along with all other commodities. It dropped by roughly half over a very short period.

“We were buying very large volumes during the boom because we needed so much.”

When the boom went bust, LMS suffered what Streu calls a double hit.

Not only were they saddled with a lot of peak priced steel in a world in which steel was selling for substantially less, but many of the projects they were prepared to supply to were either cancelled or put on hold.

The ride has continued.

“Prices bottomed out last fall,” said Streu.

“Since January we have seen some quite rapid escalation. Between January and March prices probably went up 25 to 30 per cent.”

That again, he said, is very scary.

LMS’s customers want firm prices for their steel and they expect LMS to assume the risk.

“When times were better and there were bigger margins, we could do that with a little more comfort,” he said.

“When margins are razor thin and you have your base input cost escalating by as much as 25 per cent in three months, you can see the impact that has on multi-year projects.”

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