Higher Materials Costs Change Expansion Plans

Hurricanes Katrina and Rita are putting an extra squeeze on convention center construction. With the availability of construction materials tightening up, adjustments are being made to a number of facility expansion and construction projects.

Prices for two frequently used construction materials, steel and concrete, have risen substantially over the last several weeks. Higher worldwide demand, transportation cost hikes and major capital projects, including now the rebuilding of the Gulf Coast, have all contributed to these increases.

Steel prices turned north in September, ending an 11-month slide, according to Purchasing magazine (like Tradeshow Week, a Reed Business Information publication). Two-thirds of buyers polled by the magazine paid more for steel in September than in August. Also, the magazine's carbon steel price index of 154.9 (based on a mean of 100 in January 1994) is the highest since May.

According to Ken Simonson, chief economist for the Associated General Contractors of America, concrete was "already in short supply in 32 states before Katrina hit." A double whammy came into play after the storm hit, because of New Orleans' status as the largest U.S. port for imported cement. The city handles 12 percent of the country's supply, Simonson said.

Because of the price hikes, it could be, goodbye granite, hello brick, for sections of the new Raleigh (N.C.) Convention Center, which broke ground in April. The $192 million project might be scaled back and new materials substituted, said Raleigh City Manager J. Russell Allen.

The venue paid $16 million for concrete, $4 million above budget. Steel costs of around $16 million came in about $500,000 over budget, Allen noted.

The cost of expanding the Vancouver Convention & Exhibition Centre in Canada has risen from an initial $565 million CAN ($479 million U.S.) to $615 million CAN ($522 million U.S.), according to the Vancouver Convention Centre Expansion Project. About half of the increase is due to growing material costs; the rest because of public amenities added since the original design.

"The Vancouver Convention & Exhibition Centre is not immune from the increased cost of construction materials, such as concrete," said Olga Ilich, minister of tourism, sport and the arts for the province of British Columbia.

The expansion began in November 2004 and is expected to be completed in 2008, increasing venue exhibit space from 108,000 sq. ft. to 393,900 sq. ft.

Because the $160 million expansion and renovation of the Cinergy Convention Center in Cincinnati is nearing its June 2006 completion, the upswing in material prices has had little impact. After adding 34,900 sq. ft., the center will offer 196,800 sq. ft. of exhibit space.

Even though construction is still underway, material purchases were made some time ago. "We are under budget and on time," said Bill Barnhill, event coordinator for the venue. However, the delivery of structural steel for the project has hit some speed bumps.

"The shortage of steelmaking capabilities of U.S. steelmakers required that the contractor seek alternate, foreign-country providers," Barnhill said.

A few days might have made a big difference for the Raleigh center. According to the center Web site, steel bids were received on Aug. 26, two days before Katrina hit New Orleans. Concrete bids for the venue were received on Sept. 2, three days after the hurricane's effects were apparent. Consequently, plans could still change.

"We could change out some materials," Allen said. "Instead of granite, we could go with brick. Instead of wood, you could use brick." Excavation for the planned 150,000 sq. ft. Raleigh facility is nearly complete, with opening still on track for spring 2008.

Even before Katrina, New Orleans officials felt the impact of steel price hikes. Back in August, substitutions were made to the $315 million Morial expansion plan in order to bring costs within budget.

For instance, the center expected to save $1.8 million by replacing steel panels with aluminum composite material on the building's exterior. Sabrina Written, Morial center spokeswoman, said the steel panels were there "for cosmetic reasons" and were interchangeable.

Since Katrina, officials have had little time to think about the proposed expansion and whether it will continue as scheduled. Center officials "haven't examined in detail expected cost increases in the post-Katrina supply and demand cycle," Written said. "Obviously, there could be fluctuations with material costs."

The proposed expansion would add 524,000 sq. ft. of exhibit space to total more than 1.6 million sq. ft. at the center. Before the hurricanes hit, the expansion was scheduled for completion in January 2009.