A Theme Park Insider reader who posts under the name T.Holland Creative quotes one Central Florida contractor in a post noting Universal's decision to shelve Van Helsing:
"'There are rapid changes unfolding in the steel industry which are driving up our prices in unprecedented ways. By summer the industry is predicting that steel will be on allocation for the first time in our history. We have been informed that steel price increases alone will exceed 65% by summer.'"
"This means that the price of a coaster or ride concept that was developed last autumn could as much as double by this summer. Further, it puts estimators in the difficult position of having to predict the cost of steel (not to mention the availability) one or even two years out."
Complicating the issue is a simmering trade dispute between the United States and the European Union, which this week got the green light from the World Trade Organization to put sanctions on U.S. steel due the U.S. government's failure to repeal a law that American companies have used to deter steel imports.
President Buch last year dropped some tariffs on steel imports to the U.S. after the WTO ruled them illegal. Experts said at the time that the move would lead to lower steel prices, but builders have seen a double-digit percentage increase in prices instead.
To be honest, though, even a woodie coaster requires steel in its construction, especially when you consider the infrastructure improvements that parks typically make to an area around a coaster when building it.
The steel situation has hit the construction sector incredibly hard, and the US's reliance almost entirely on domestic steel will come back to bite us.
I'm guessing that the cost of the materials would comprise less than 50% of the total cost due to the design and engineering elements. Depending on the type of ride being built, the percentage of the construction materials that are made of steel would be only a portion of the construction materials. So, it just doesn't seem to make sense that an increase in the price of steel would have that dramatic (more than 20%)of an effect on the total cost. Is the increase in the price of the steel a red herring or is it a viable problem that truly threatens the development of new rides and attractions?
Due to a lower emphasis on theming it would also seem that Cedar Fair and Six Flags would be taking a greater hit in the attraction construction budget than anybody else in this situation. Are they making sounds about this problem, too?
Something seems a little overblown about this whole situation. I hope Universal isn't taking a page out of Disney's book and coming up with flimsy excuses not to build quality attractions.
Couple that with Alan Greenspan's sobering -- if not frightening -- comments about Fannie Mae and Freddie Mac earlier this week (which did not receive nearly the coverage they deserve thanks to the gay marriage amendment -- hey, look at the monkey! Look at Chewbacca!), and the nation could be facing a crisis in the commercial and residential real estate markets. And since real estate prices are supporting the nation's consumer credit bubble, America's economy is toast if either the commercial or residential real estate market falters.
So, yes, the steel price issue is a huge deal. Not just for the immediate increase in materials costs, but also for the long-term affect it could have on the economy and consumers' financial ability to afford theme park vacations.
I've been around long enough to have seen this before, and I'm not overly concerned. Remember the shortage in microprocessors due to the fire in a production plant somewhere in the Far East? Yes, there was a short bump up in the prices of equipment using those microprocessors for a while, but the situation corrected itself in a reasonably short period of time.
I can recall just a few short years ago when domestic steel producers were begging for tariffs because they were getting creamed by foreign steel producers "dumping" cheap steel in the US market. I think that was the impetus for the tariffs that President Bush not-so-wisely placed upon certain types of foreign steel. Now we seem to have an international shortage of steel and domestic production capacity is inadequate to keep up.
If this is truly an international situation, it should be sorted out in a reasonably short period of time. Experts have placed the blame for the shortage on extra-heavy demand in China. If that is the case, then they will be far more afffected by an increase in steel prices since the cost of raw materials in their finished product is a higher percentage than here. (The price of labor and overhead being the difference.) China has to compete for many of the same steel supplies that we do and they will be hurt more than we will by rising prices and will have to cut their demand accordingly.
According to the MEPS website, the price of hot-rolled coil steel has approximately doubled in price since 2001 with a recent surge contributing to much of the increase. So, yes, there is a significant increase in the price of steel, but how much should that effect the overall cost of developing a new attraction like the Van Helsing Robocoaster at IOA? I still think there's more to this situation than what's being publicly stated.
Universal went into Van Helsing with a projected budget of $55 million. I believe they may have underestimated the cost and as they looked closer at the project they realized it was going to cost substantially more. While the rising cost of materials (including steel) was probably not the sole reason for that price increase, I have little doubt it was a contributing factor.
In a related point, all construction costs are subject to an annual attrition. The longer Universal waits to build a prototype attraction for IOA, the more it is going to cost.
I think USF is taking away from IOA's luster, and it may be a tug-of-war between the parks that may continue cyclically over the next decade.
So that'd be three small attractions there. But it has been more than a couple years now since those opened.
Once all 25 items are complete, Disney will be writing us a check for well over $100,000.
Maintaining large resorts -- and preventing them from looking TERRIBLE -- costs thousands, and sometimes, millions.
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