Palmer firm steels itself for market changes

PALMER -- A young Palmer company that provides a key ingredient for Alaska construction projects is looking ahead to summer jobs while juggling unpredictable changes in the cost and availability of its raw material.

J.D. Steel Co. Inc., a national company with headquarters in Phoenix, opened its Palmer plant in December 2002. The local firm already has earned a niche in the state's construction business by grabbing some big contracts -- including nine separate jobs at Fort Greely involving 2,500 tons of steel.

The plant does fabricating work and supplies steel reinforcing bar, or rebar, for concrete support. The steel acts as a skeletal system for buildings, bridges and other things using poured concrete.

But getting enough rebar has become a tricky proposition, according to Scott Hamilton, J.D. Steel's operations manager in Palmer.

"The Asian market is buying all the scrap steel available," he said. "The West Coast markets are at an extreme disadvantage at the moment."

The recent closure of one of just three steel plants producing for West Coast buyers added to the problem, Hamilton said. So did the Environmental Protection Agency's ruling that Nucor Steel's plant in Seattle must cut its production to just 30,000 tons of steel per year due to pollution violations.

"That's maybe one-fourth of their usual production," Hamilton said.

Companies such as J.D. Steel are now on an allocation system imposed by the steel mills, Hamilton added.

"To us, it was paralyzing. We're are one of the largest fabricators up here."

Given the situation, company employees were understandably happy when two more railcars carrying 60-foot sections of rebar rolled into Palmer this week. It brings to seven the number of railcars that have delivered rebar to J.D. Steel this year, and Hamilton hopes another 10 arrive later on.

Each railcar can carry up to 180,000 pounds of steel. The material is put into railcars in the Lower 48 and barged to Whittier. Then the cars roll to Palmer and an Alaska Railroad spur near the J.D. Steel plant.

How much steel to have on hand is a guessing game because the lag time in producing and shipping rebar means it must be ordered before job bids are awarded. One contract J.D. Steel is hoping to land this year involves part of another $200 million phase of work on Fort Greely's missile defense system.

"We're just trying to put enough in our yard that if we do get Greely or other commercial jobs we can cover it," Hamilton said. "We're doing a lot of forecast purchasing now. That's why these railcars are coming."

The company is paying more to have the product available. Hamilton said one-ton bundles of rebar cost $500 apiece at this time last year but the price is now between $800 and $850 per bundle. Tuesday, Nucor Steel informed J.D. Steel officials of a $93-per-ton price increase to take effect in 10 days.

Meanwhile, the company has found a significant part of its business in residential construction, something Hamilton says wasn't anticipated but shows the strength of the Valley's housing market.

"It's turned out to be a huge part," he said. "The commercial side of the industry is showing signs it will be hot, too."

Hamilton acknowledges it's nice to land big contracts such as Fort Greely or work at the Pogo Gold Mine near Delta Junction, for whom the company has served as subcontractor in the past. However, surviving changes in the industry means smaller jobs are important, too.

"The Fort Greelys and gold mines come and go," he said, "but we have to adapt to the small customers' needs."