WHAT IS UP WITH THE COST OF STEEL?
The price of steel is at levels not seen since 2008, just before the market crash. And according to MarketWatch, the peak is not yet in sight. As a manufacturer of steel tanks, this is unwelcome news to us, as we know it is to our customers.
We recently reached out to Sean McGahan at Shamrock Steel, an STI affiliate steel distributor who has worked in the business for two decades, to get a better understanding of why steel is spiking so dramatically.
The first thing he did was show us a letter he’d sent to his own client, explaining how his own company had been affected by the 96% increase in the cost of steel since June 2020.
COVID and Tariffs
McGahan explains, “One of the reasons for the spike is, of course, COVID. The uncertainty led to steel distributors letting their inventories get too low, and steel mills reducing their production in anticipation of slow sales.”
The fact that steel mills shuttered a full third of production from March to June of 2020 is well known. Manufacturers tried to protect their crews from COVID and shore up production as markets predicted an economic downturn. That created an immediate shortage.
But what’s less known is just how wrong that forecast turned out to be: as interest rates dropped to historic lows, new construction boomed. Business Insider summed it up: “The hottest pandemic purchase is a house, as more and more Americans take advantage of low mortgage rates to attain spacious backyards and more comfortable work-from-home locales.”
Another major contributing factor to the spike in steel prices was tariffs. McGahan continues, “The tariffs enabled steel manufacturers to raise their prices without fear of foreign competition, at least to a point.” The steel tariffs have helped U.S. steel mills compete domestically against foreign companies since 2018. However, they have simultaneously hurt manufacturers downstream of those tariffs. According to a recent study by Columbia University, about half the cost of the 25% tariff on foreign steel is passed along to domestic steel distributors, which gets passed along again to us, the steel tank manufacturers.
The combination has driven the price of steel “off the charts,” as McGahan describes it.
So when does it end?
There is reason to hope that prices may peak or decline in the second half of 2021 due to new steel mills going online. However, putting a date on a calendar is — at best — imprecise: new infrastructure initiatives, combined with a still-booming real estate market means we may have to endure this situation a bit longer.
Equally, distributors worry about buying too much steel while the price is at an all-time high and getting stuck with the inventory, so the tug of war between supply and demand continues for all of us. As McGahan explains, “These rapid increases in steel pricing make it difficult for estimators to stay ahead of the curve, and they are frustrating to everyone except maybe the steel mills. In times like these I try to keep my customers informed as best I can, but it’s very hard when the increases come one after another.”
We’re trying to keep you informed, too. Let’s hope the situation rectifies sooner rather than later.
The Golden Arms: Welding at Newberry Tanks
“Quality is never an accident,” or so the saying goes. But what goes into quality, and/or craftsmanship? Specifically, when you’re talking about welding? Is craftsmanship purely raw talent with the torch, or does it require more?
While welding a sculpture arguably requires only talent, welding steel tanks for oil and petroleum storage requires not only skill, but dedication, effort, and discipline, every day on the job. Each and every oil tank must perform perfectly for the thousands of oil jobber, lube, PEI and agricultural industries that rely on oil and petroleum storage so their own businesses can function. The tanks must also meet industrial, fire, and governmental compliance codes, to protect our safety and our environment. In short, every tank, must be a masterpiece. That’s a high bar.
We decided to pay a visit to the production floor, to find out more about how Newberry achieves that kind of craftsmanship.
Welding with Confidence
The heat is the first thing that strikes you on the floor.
“In the summer, it can be over 100 degrees in here. We have fans and forced air to keep them cool, but welding is by nature hot. And they’re standing a lot of the time, probably 50-75% of the time,” Jerry Cagle explains. Cagle, Director of Inside Sales and Customer Service at Newberry, has been with the company for more than 45 years.
More than 70% of the welders at Newberry have been with the company 10 years or more, and most in the trade for a decade more. As veteran welders, the majority are in their 40’s or 50’s. It’s difficult to imagine what kind of endurance they must have to withstand the heat, let alone, how much of the day they are on their feet at that age. Recruiting veteran welders, let alone retaining them, must be difficult?
Cagle nods, “We know what we have in our guys, and we respect them. We let them work at their own pace, decide when they need breaks.”
Measure Twice, Fit Once
The floor is alive with activity: gas tanks, diesel tanks, DES tanks, and of course oil storage tanks are all in production. So what is the process for their craftsmanship?
Jerry explains, “The steel is brought out in flats for rolling. We use a standardized, A Grade 36 steel for all standard tanks. As a member of The Steel Tank Institute, we have to use codified, optimal materials. There’s never any question of substitutions, because as an STI member, we are subject to period unannounced inspections, to ensure the materials and that every tank is built to all applicable UL codes in material and design.”
He continues, “Now once the steel is on the floor, we use a Lean Manufacturing process. Every tank is made by one welder start to finish, rather than a team. He’s assigned a tank – say a 10,000-gallon tank. And he’s allotted 8 hours to build that tank on his own. It’s a semi-automated process but he rolls his own sheets out. A 10,000-gallon tank requires five shells. The welder must get them absolutely even – length width and depth. If they miss by even one inch, they’d have problems once they got to the weld – any error like that and it wouldn’t fit up. So they measure everything twice. There’s no room for any mistakes.”
Flux Core Welding & Butt Joints
The true Newberry difference in design is due to flux core welding, as well as butt joints. They require skill from a welder, as well as patience and intention.
“You have to hold the gun precisely in one position, for quite some time,” Jerry explains. “The gun has a little trigger on it. You pull the trigger and wire shoots out of the arc. The arc comes up when the wire hits the steel, melting the wire and fusing the steel. The beauty of the flux core is that it actually does a better job keeping foreign metals out of the melted steel and that helps give you a good weld. If it didn’t have the flux core it would have all kinds of pin holes in it and bubbles and blisters, trash and dust.”
“Some of our competitors still use a sub-arc technique, but we switched years ago after we compared both methods and realized that a sub-arc is slow, which means the build is slower, and that adds to the cost for the customer.”
“Saving time with the flux core technique also means we can use butt joints, which are stronger than the lap joints a lot of our competitors use. A butt joint means they abutted two pieces of steel and welded that seal inside as well as outside. A lap joint – or joggle joint – is an overlap joint. It’s not welded on the inside. That means it’s a weaker point on a tank.”
Work Fast, Work Well
Once the tank is welded, the welder will test the tank himself: air test, test for leaks, structural variables, any kind of damage or weakness. If the tank passes every test, the process will be repeated by another welder on the floor to ensure the test itself is correct before the tank is sent out the door as a finished product.
“Our welders work fast. First, because they can: they’re all veterans, as I’ve mentioned. But also there’s a built-in bonus if they can build that 10,000-gallon tank in less than the 8 hours allotted. That’s how we keep our welders happy: they can make more money at Newberry.”
But how does working faster mean better? Isn’t there a risk something would get overlooked? No. Newberry has a failsafe: their Lean Manufacturing principles mean only one welder works on each tank, and each tank has a production number. The welder’s name is inseparable from the quality of his work.
But it’s more than that to these “Golden Arms”, as true artisan welders are called. It’s a matter of pride. Jerry explains, “Frankly, if there was a problem, these guys would pull the tank themselves rather than have the other guys see it.”
We Got Rhythm!
Newberry Tanks is a proud Gold Level Sponsor for Stax Music Academy, a program of the Soulsville Foundation, which also operates the Stax Museum of American Soul Music. Founded in 2000, the Academy is celebrating 20 years of equipping young musicians with the skills they need to excel in music, as well as leadership training. In addition to our sponsorship, Newberry Tanks is proud to support Stax Music Academy’s #MusicMustContinue campaign by matching every donation made during the week of August 3 up to $5,000!
COVID-19 has forced many organizations — including Stax Music Academy — to go virtual. Simultaneously, many schools are slashing their budgets for the arts, so Stax Music Academy is now providing free virtual workshops and classes for all students in Shelby County to those without. The music must continue for these young students. Together, we can be a lifeline for kids across Memphis and Shelby County, making music education accessible regardless of their ability to pay.
Why is Newberry investing in a Memphis music academy? Read on.
Newberry Employee of the Year 1946: B.B. King
In 1946, Newberry Tanks was a thriving supplier of oil tanks and equipment thanks to hard work, quality products, reliable delivery times, and intentional innovation. But that year, Newberry was also the employer of legendary blues guitarist Booker (Bukka) White, and his young second cousin…none other than the ‘King of the Blues’ himself, B.B. King.
The story goes like this: Bukka worked for founder Jimmy Newberry at Newberry Tanks long before he became a celebrity, his skills as welder as deft as his skills on a guitar. After a stint in prison, Bukka needed a job and went back to see Jimmy. Bukka was expecting a no, but Jimmy hired him back, believing everyone deserves a second chance.
One day Bukka arrived home to find his young cousin, Riley King, asleep on his stoop. Going by “Blues Boy” (soon to become B.B.), the King of the Blues was barely more than a teenager. He’d hitched all the way from Mississippi, in the hope his famous cousin would introduce him to the Memphis music scene. Bukka not only did that, but introduced him to Jimmy so he could support himself. Together, Bukka and B.B. welded by day at Newberry, and set fire to Memphis blues scene at night.
Bukka never forgot the kindness Jimmy Newberry had shown him and his young cousin: he stayed with the company the rest of his career. B.B. left Newberry to become a musical legend.
The Music Must Continue
Today Newberry Tanks is committed to continuing Jimmy’s legacy of supporting musicians in recognition of and respect for the talents and craftmanship of our current and former employees.
Making music just got a little harder, while playing a key role in keeping us all going through these hard times. The music must indeed continue. Here at Newberry, we are #StrongAsSteel” and we intend to help make sure these kids, the community, and the world at large can foster and enjoy the music. Join us in supporting and celebrating the work this wonderful academy is doing. And be sure to tune in for their music online! They can be found on Twitter, Facebook, Instagram and YouTube.
Help us in supporting this worthy cause! You can donate here.
Newberry Tanks and Memphis-based Stax Music Academy Announce Sponsorship
West Memphis, AR May 7, 2020 – Today Newberry Tanks LLC and the Memphis-based Stax Music Academy jointly announced that Newberry is a new Gold Level Sponsor for several programs of the academy. The sponsorship will enable talented children and young adults to receive musical training and mentorship at Stax.
The brainchild of Memphis business professionals, philanthropists, and former Stax Records artists and founded in conjunction with the adjacent Stax Museum of American Soul Music at the original site of Stax Records, the Stax Music Academy is now celebrating its 20th anniversary as both an institute that offers intensive music education and youth development programming.
The investment holds special meaning for Newberry Tanks as well.
Newberry Tanks CEO Chris Long commented, “As a Memphis company, we feel we have a responsibility to uphold the tradition started by our founder, Jimmy Newberry, in supporting the blues and blues musicians. Not many people know this, but back in the 1940’s, Newberry Tanks employed Bukka White and B.B. King as welders, even though Bukka was newly released from prison and King had no experience as a welder. Full-time employment wasn’t always easy to find in post-war Memphis, but Jimmy believed in them both, and by enabling them with full-time employment, he helped enable them to give the gift of their music to the world.”
Long continued, “Great music is a gift that never ages, while great talent is rare and frequently in need of support. We have watched the students at the Stax Music Academy for years and we’ve decided it’s our duty to get involved. We look forward to a great partnership with the Stax Music Academy for many years to come.”
According to Stax Music Academy Executive Director Pat Mitchell, “The Stax Music Academy is always appreciative of corporate support and sponsorships, but this new partnership with Newberry Tanks holds a special place for us because of their involvement in the rich history of Memphis music, which is the core of what we teach, study, and perform. Blues and rhythm and blues are genres in which our students excel, so it’s only fitting that the company that once employed B.B. King and Bukka White are now supporting the Stax Music Academy.”
For more than 90 years, award-winning Newberry Tank and Equipment has been manufacturing quality aboveground and underground steel tanks for the American Supply Chain and every branch of the U.S. military. The “Think Tank” of Oil and Petroleum storage, Newberry Tanks is intent on innovation: offering tanks on demand, dedicated customer service, turnkey solutions, and the fastest delivery in the country. *Ask about our Preferred Customer Program
Founded in June 2000, the Stax Music Academy inspires young people and enhances their academic, cognitive, performance, and leadership skills by utilizing music with an intense focus on the rich legacy and tradition of Stax Records. It exists to nurture and present the next generation of great Soul Communicators from the greater Soulsville region, holistically equipping them to excel and to impact the world through the universal language of music.