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Volume 20 No. 42
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Steel firm beaming out of sports

Fabricator Canam’s exit narrows already short list of suppliers

One of the biggest steel fabricators in sports will no longer pursue arena and stadium jobs, in part because of the millions in cost overruns tied to the construction of Mercedes-Benz Stadium.

Officials with Canam Group, a publicly traded company in Quebec with 22 plants across North America, made the announcement during its Feb. 16 earnings call while reporting significant losses for both the fourth quarter of 2016 and the fiscal year.

“We can no longer participate in large complex structural projects in the current market conditions,” Canam President and CEO Marc Dutil told investors on the call. “The industry dynamics no longer justify the risk, the talent and the capital we are investing.”

The company reported a net loss of $13.3 million for fiscal year 2016, compared with $46.8 million in net income for 2015. For the fourth quarter alone, Canam had a net loss of $2 million compared with net income of $17.8 million in 2015. The company averages 10,000 projects annually and has supplied structural steel for about 75 sports venues over the years, Dutil said.

During the call, Canam officials did not identify the Atlanta Falcons’ stadium by name other than to say cost overruns at a major U.S. stadium project represented half of its financial losses for fiscal 2016. Mercedes-Benz Stadium and its complex retractable roof designed by HOK and structural engineer BuroHappold is the sports facility in question, industry sources said.

Canam Group has supplied steel components for $1.5B Mercedes-Benz Stadium in Atlanta.

In November 2014, Canam announced it had won a $200 million contract to fabricate steel components for Mercedes-Benz Stadium. The contract was awarded by the joint venture of Holder Hunt Russell Moody, the stadium’s general contractor.

At the time Canam was awarded the contract, the cost to build Mercedes-Benz Stadium stood at $1.2 billion. Over the past two years, the cost has escalated to $1.5 billion, with delays over roof construction pushing its 2017 opening date from March to the end of July.

Last summer, $200 million in change orders alone were made to the project, the Atlanta Journal-Constitution reported. The details of the adjustments were not disclosed, but the Falcons said most of the cost increase was connected to issues with structural steel.

AMB Group, parent company of the Falcons and Atlanta United FC, is responsible for covering cost overruns on the stadium, according to contract terms with the Georgia World Congress Center Authority, the stadium’s owner. AMB Group officials declined to comment on the situation.

The delays have forced Atlanta United FC, the Falcons’ co-tenant at Mercedes-Benz Stadium, to play its first eight home games at Georgia Tech’s Bobby Dodd Stadium before christening the new building with a July 30 match against Orlando City.

It’s not the first time Canam has been involved in delays and cost overruns in sports facility development and, specifically, roof structures. In January, Canam filed a lawsuit for breach of contract against developers of the new retractable roof in place at the U.S. Tennis Association’s Arthur Ashe Stadium.

The lawsuit, filed in U.S. District Court in New York, names builder Hunt Construction (now AECOM Hunt), sports architect Rossetti, the USTA and two other parties as defendants.

The complaint details adjustments to the roof design and the extra work and investment Canam says it took on to make those corrections. Canam has sued for more than $375,000 in damages, and claims AECOM Hunt still owes the firm $4.7 million for its work, according to the document.

Danny Zausner, the USTA’s chief operating officer, said in an email that he could not discuss continuing litigation. Canam’s attorney Robert MacPherson did not return an email for comment.

In 2011, Canam was sued by a French engineering firm for $40 million over a roof project for B.C. Place in Vancouver, a job that resulted in $25 million in cost overruns. Canam countersued for $26 million. The lawsuit was settled out of court, according to local reports.

Given its history and what in general has become a hypercompetitive industry with skinny margins, the Falcons’ project became the tipping point for Canam’s decision to leave the “heavy steel” space, according to industry sources.

The newer arenas and stadiums have become “works of art” and Canam is proud of the jobs it has completed, Dutil said after the earnings call. At the same time, it seems like every major sports project it works on now results in litigation and it’s “just not fun” anymore, he said.

Arena and stadium developers often set unreasonable expectations to complete a steel project in the fast-paced sports market, Dutil said, which sometimes leads to incomplete work documents handed over to Canam for steel production.

“We’re grateful for the work and are very respectful of the sports environment,” he said. “But you have a gun to your head at the minute they say ‘Go.’”

“They’re a really good company and I’m sorry to see them pull out,” said Lee Slade, chairman of the board and executive director of structures for Walter P Moore, one of sports’ leading structural engineers.

Counting Canam, there are about five major steel fabricators in sports, including Hirschfeld Industries and Schuff Steel. Removing one from the mix could potentially drive prices up for future projects, said Tom Tingle, a former senior vice president with Skanska, a sports builder.

“The biggest concern I would have is competition,” Tingle said. “You always want it to keep prices in check. This move takes one very strong player out of the market. It will be interesting to see how it affects new projects.”

In Los Angeles, Canam competed for supplying structural steel for the new $2.6 billion NFL stadium for the Rams and Chargers but did not get the job, project officials said. As of last week, the selection of a fabricator had not been announced, officials said.

The Falcons remain on schedule to play their entire season at Mercedes-Benz Stadium, including two August preseason games. Canam’s Dutil confirmed the timetable during the earnings call.

“The steel is out of our shop and [the Falcons] will make their season,” he said.