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Big Steel Renews Push Into Home Buildings

Steelmakers want home builders to test their metal.

The steel industry is targeting consumers like Dan and Pattie Nickel, who are putting up a $2.5 million, 10,000-square-foot, Spanish Colonial-style hacienda in San Clemente, Calif., overlooking the Pacific Ocean. In June, when they started building their "Casa Nada" (so named because it sometimes seemed as if it would never be built), the Nickels paid $10,000 to change their drawings from wood framing to steel, a material commonly used to frame skyscrapers but rarely homes.

"A lot of people are saying, 'Wow. That's new. That's unique,'" says Mr. Nickel, 39, chief executive of computer firm Nitech, a division of Nickel Technologies Inc. "Some think I'm spending a lot of extra money but I'm actually not. I have spent less."

The Nickels say they were sold on steel after noticing their neighbors in wood-framed houses had problems with mold and termites. They also thought steel would stand up better to forest fires. They figure the switch also saved them $120,000, because it required the use of less red iron and less concrete. Although in some cases steel building materials can be cheaper than wood, labor costs in steel construction are usually higher.

Metal roofing comes in tiles, shakes or shingles. This one uses 'autumn gold' metal tiles from Dura-Loc Roofing Systems Ltd.

The steel industry, which struggled for decades, doesn't want to miss its chance for a piece of the booming housing market. Having consolidated in recent years, larger and better-managed steel companies are on a quest to create new markets and to better exploit existing ones.

Home building is "one of the targets steel has had in its sights for more than a decade now," says Don Moody, general manager of NuconSteel, a unit of Nucor Corp. About 1.6 million new homes go up each year, he says. "If every house is framed in steel in the United States, that would be a 14 million-ton market per year. The steel industry hasn't had a new opportunity like that since the invention of the automobile."

The industry is pushing steel's ability to withstand hurricanes, termites and earthquakes, and to keep a house cool. Although steel framing makes up less than 2% of new, single-family home construction in the U.S., it accounts for 72% in Hawaii, where insects wreak havoc on wood. And steel makers are teaming up with concrete suppliers to push the idea of homes with concrete exterior walls and steel interior walls.

Still, high prices remain an obstacle. Steel prices have come down a bit this year, after doubling in 2004, and supplies remain spotty in some areas. Meanwhile, wood prices are climbing steadily, rising 20% in the 12 months that ended in October, according to a weekly composite index of wood prices. Steel companies have had a hard time persuading consumers that steel is a better value. The rising price of steel "has greatly damaged their potential for picking up a larger share," says Michael Carliner, an economist with the National Association of Home Builders.

With their push into home building, steel makers are throwing themselves into direct competition with suppliers of asphalt roofing shingles. Commercials paid for by the Metal Roofing Alliance are running on the Weather Channel, the Learning Channel and home- improvement shows. Print ads depicting an array of painted colors and styles -- shakes, tiles, shingles and vertical panels, all imitating various roofing styles, but with more color options -- are appearing in magazines such as Southern Living and Coastal Living.

One TV ad features a real-estate agent offering a metal roof as a selling point, while showing a home to an astonished couple. "People who know about metal roofing love metal roofing," the agent says. "We call it investment-grade roofing, because it adds value to your home and pays for itself many times over time." Another ad says, "Over the course of 50 years, you could have three children. You could buy nine cars. You could take 66 vacations. You could own seven pets. And you could need only one roof -- provided you invest in a metal roof."

Steel makers want to sell metal roofs directly to people like David Kidd, a retired Air Force chief master sergeant, who decided to spend $14,000 on a metal roof for his 30-year-old house in Roy, Wash., after replacing the asphalt roof twice. "We are retired and didn't want to mess with any more roofs, so we just wanted to have a metal roof put on," Mr. Kidd says. "We won't have to put another one on."

Colorful, shiny metal roofs are starting to appear on new homes dotting the slopes of Colorado's Rocky Mountains. Although snow melts and slides off metal roofs, some architects and builders say metal roofs, like asphalt roofs, can still develop leaks near seams and require repairs, particularly if they aren't put on correctly. Generally speaking, the cost of a metal roof can run two or three times that of a high- quality asphalt roof.

The metal-roofing market, both residential and commercial, is expected to grow 25% over five years, to $3 billion in 2008 from $2.4 billion in 2003, and make up 8.4% of overall the roofing market, according to the Freedonia Group Inc., a Cleveland research firm.

Asphalt producers are striking back, trying to get municipalities to endorse asphalt roofs as part of local building codes. "Asphalt roofing shingles have a proven record," says Joe Hobson, spokesman for the Asphalt Roofing Manufacturers Association. An asphalt roof will typically last from 15 to 20 years, depending on its quality, thickness and the environment, says Chuck Scislo, senior technical director of the National Roofing Contractors Association. Tile-roofing proponents say their roofs, seen in the U.S. mainly in Florida and California, have been used for thousands of years and can last for well over 50 years. But again, the cost can be triple that of a high- quality asphalt roof, the Tile Roofing Institute says.

Steel homes actually go back a few decades. The Lustron Corp. touted its affordable Lustron steel homes as a way to solve the post World War II housing shortage. But after producing the homes for about two years, the company filed for bankruptcy protection from creditors in 1950. Some 2,000 of the sturdy Lustron homes are still standing, including several in Lombard, Ill.

More recently, an avant garde architect or quirky home buyer tries to build a home entirely out of steel. Arthur Cotton Moore and his wife, Patricia, did so in the late 1990s, building a stainless-steel mansion on Maryland's Eastern Shore. But they decided the 4,000- square-foot home was too far from civilization and now are trying to sell it.

To raise steel's acceptability in the construction market, a Washington group called the Steel Framing Alliance is recruiting architects, home builders and engineers for training programs. The group has erected an entire house out of steel at trade shows, to show how it is done.

And steel makers are lobbying the federal government to give energy-efficiency tax breaks to steel-intensive houses. They are asking property appraisers to give higher appraisals and insurance companies to give preferential rates to such houses.

Beyond the prices, there are other obstacles. Carpenters have to get new tools -- hack saws and metal screws -- to work with steel frames. John Palczuk, a Raleigh, N.C., general contractor, says he has built more than 200 houses, but he has used steel framing on just one. That was several years ago, when wood prices spiked. "It took a little bit more effort to find people to get that job done," he says.

Steelmakers' biggest challenge may be to persuade builders to throw away years of experience working with wood. "There are not many contractors who build out of steel," Mr. Nickel notes.

"There's always some resistance to newer materials being used," says Robert P. Curran, an analyst who covers home builders and materials for Fitch Ratings. "Builders aren't tremendously fast to adapt."

Alan and Sara McFarland in Tacoma, Wash., opted to spend $18,000 on a coffee-colored shake-style steel roof for their 2,500-square- foot, three-level home, rather than $8,000 for an asphalt roof. Mr. McFarland, a 55-year-old engineer with Sun Microsystems Inc., says his house is one of the first in the neighborhood with a metal roof, and neighbors have been asking how much it cost and where they can get one. His daughters worried that rain on the metal roof would keep them awake at night. But Mr. McFarland says the roof is quiet and actually deters wildlife.

"Birds don't land on the roof because they have a tendency ... to just slide right off," he says. The family cat is having to adjust to the new roof, too. She used to climb over the roof and jump into the bedroom window, but "she can't do that anymore because she can't do that anymore because she can't get enough traction."

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