FORT SMITH -- The city's utility director warned city directors this week that volatility in the steel market caused by tariffs will affect the price the city spends on steel pipe to comply with a federal consent decree.
Jerry Walters briefed directors Tuesday as they prepared to consider a resolution to make a nearly $1.33 million initial payment for a project to install several thousand feet of pipe as part of sewer system capacity improvements that are required in the consent decree.
The entire project, under a contract with KAJACS Contractors Inc. of Poplar Bluff, Mo., is estimated to cost about $10 million.
Walters said $785,000 of the $1.33 million cost was for steel pipe. He told directors that figure was important because the 25 percent tariff President Donald Trump imposed on many countries' steel and aluminum imports was making the steel market volatile.
"And because of that, I think you're going to see that volatility flow over into our projects," Walters said.
The utility department uses a lot of steel in the water and sewer pipes it lays throughout the city.
Directors also passed two resolutions Tuesday awarding design contracts on another project to improve sewer capacity. That project calls for installing 2½ miles of sewer pipe.
Walters told directors his staff has heard reports that some price quotes are based on the hour, raising the possibility of rapidly changing prices. Hourly quotes normally are unusual, he said.
Walters said he was unsure that volatility in the market would make that much of a difference in an individual project, but he and his staff would keep it in mind.
"Overall, we may well see an increase in the price of steel," he said.
Contacted for further comment Friday, Walters said in an email it was too early to determine what the impact of the tariffs will be on steel prices.
City Administrator Carl Geffken said in an email Friday that the tariffs have been in effect for just a short time and there was no way to determine the effects they will have on companies, industries or the economy.
"As the pipe is purchased, the market rates will be paid for the steel," he said. "It's unknown the full extent of the impact of the tariffs."
A New York Times article Aug. 1 said ArcelorMittal, the world's largest steel producer, received an average price for its steel in North America that was up 12 percent annually to $853 a ton.
The company, headquartered in Luxembourg, attributed a 41 percent increase in second-quarter profits over the same period last year to the rise in steel prices along with strong global demand, according to the article.
The American Steel Index closed at 1,221.96 Friday on the New York Stock Exchange, an increase of 2.34 percent.
Fort Smith signed a consent decree in early 2015 with the U.S. Environmental Protection Agency, the Department of Justice and the Arkansas Department of Environmental Quality to make improvements to its sewer system to fix longstanding violations of the federal Clean Water Act.
The city has been given 12 years to complete the work, which city officials initially estimated to cost $450 million. City directors increased sewer rates for its customers by 167 percent over three years to generate the revenue to pay for the improvements.
State Desk on 08/25/2018