|The Bahamas Investor Magazine
July 1, 2006
July 1, 2006
A Hong Kong-based manufacturer that wants to export steel houses to the United States has landed in Freeport, Grand Bahama. Steel HQ (Bahamas), a firm that designs and manufactures a light-gauge steel framing system and packages it into ready-to-build homes, is investing $2 million this year to establish a strategically located manufacturing and distribution centre on the island to serve its global expansion.
“Freeport was on the list of five locations that I considered we needed to move to, to stay competitive and maintain a quick delivery system,” says Daniel Gross, Hong Kong-based CEO of Steel HQ, a subsidiary of China Building Systems Ltd. Over the past three years, Gross, an American, travelled to sites in Mexico, Cuba, Florida, the Cayman Islands and the Dominican Republic before deciding that Grand Bahama had all the right ingredients for his new manufacturing and distribution centre.
“When I first got off the plane in Freeport from Fort Lauderdale, I liked it immediately,” Gross says, who got a tour of the city from Barry Malcolm, executive vice-president of the Grand Bahama Port Authority Ltd (GBPA), the privately owned agency that governs Freeport’s residential, tourism and industrial sectors. “When I met the executives at the Port Authority, I was so impressed with their open-ness to accept a foreigner and a new project,” he says.
Gross has specialized in setting up factory lines across Asia for more than 35 years and was one of the first American entrepreneurs to set up a wholly owned manufacturing plan in China’s Shenzhen special economic zone in the mid-1980s, on the mainland near Hong Kong. He founded China Building Systems about four and a half years ago.
What initially sparked Steel HQ’s interest in Grand Bahama was an observation that its Geneva-based global container shipper, Mediterranean Shipping Company (MSC), was typically routing most of China Building Systems’ US-bound goods via the Freeport Container Port.
Gross, who had never travelled to Grand Bahama before, was impressed by the resources he found on the island, just a 30-minute flight from Fort Lauderdale.
“After driving down the Queen’s Highway and seeing all the land and buildings available for the factory, it was like a dream come true: so many opportunities, so much time that could be saved,” he says. Apart from the logistics and ease of access to key North American centres, Gross cites the stable government, the duty and tax advantages available and the eagerness of the local business community to help as deciding factors to incorporate an international subsidiary company in The Bahamas.
“Very few places I have been to can come close to what Freeport offers, and I have lived, worked and visited 50 countries,” Gross says. “Freeport also has port-connection services to all of the eastern seaboard, the Gulf ports and even Europe, conveniently available. [The lower] cost of logistics just favours Freeport over any other city we might have considered,” he says.
Business development officials with the Port Authority had identified China Building Systems as a potentially good fit as an addition to their expanding industrial park. Less than a year after Gross’ initial tour of the island in March 2005, the deal was sealed and all of the necessary business permits were in place.
“It’s been fascinating to work with them. It’s a great company, a company whose business model is well served by what Freeport has to offer,” says Malcolm, who is one of the leads in new-business development for the Port Authority.
Today, Steel HQ’s site is rising in the industrial park just west of the city centre of Freeport, adjacent to the Grand Bahama Power Company’s generation facilities and the PharmaChem pharmaceutical manufacturing plant.
Both the GBPA and Steel HQ are counting on steady growth in the Caribbean, US and South American markets for modular, steel-framed housing, for both affordable housing and more upscale residential developments. Such problems as termites, mould, water and wind damage are turning more builders to consider using structural steel designs, instead of wood framing, in residential construction, including those in the US Gulf States. The need for affordable housing that can be quickly built is becoming more urgent in such states as Mississippi and Louisiana devastated by the 2005 hurricanes, where the Federal Emergency Management Agency (FEMA) has assisted more than 110,000 households set up in temporary shelters, such as trailers.
According to the US-based Steel Framing Alliance, steel framing accounted for just 1.5 per cent of the US residential market and two per cent of the Canadian market in 2002, the most recent year that data is available. However, some regions are adopting this kind of building system at an accelerated rate, including eight per cent of homes in California, nearly half of new homes in South Florida and nearly three quarters of homes on the island of Oahu, HI.
Ease of access
“In the United States, the market is growing 60 to 70 per cent a year right now,” says Henri Ho, recruited as CEO of Steel HQ’s Bahamian operation in late 2005. “It’s picking up, because the base is very small right now,” he says, although the company already sells its product to clients in Hawaii, California and the US Gulf States.
“The good thing is it can turn very fast. People think that steel framing is a low-end type of construction material, but when you wrap it up with good finishing–good marble work and good detail work and good furniture–in a good design and a good location, it could be a $3 million building. Once you enclose the walls with gyprock and other finishing, it just looks like any other house.”
Steel HQ is also interested in the domestic Bahamian market, hoping to supply local developers in their bid to expand the second-home market around the islands. “We want to start it here with something of quality that people will look at and say that this system is not only for fast turns and affordable housing,” Ho says.
In addition to the metal framing, the company is able to supply “a house in a box,” delivering a single container with all the necessary building materials, right down to windows and doors. It’s a system that is easy to transport, even to remote locations, and Gross says that over the past four years the company has built light-gauge steel projects in isolated places along China’s Silk Road north of the Himalayas and in the Cape Verde Islands off the coast of Senegal.
Steel HQ’s factory in Freeport will process the light-gauge structural steel components using computer-aided design and manufacturing, delivering factory-made units for fast on-site construction. The system is adaptable to building requirements in different countries; external finishes include brick, cladding or stucco and structures can be designed up to seven storeys high.
In March, Steel HQ completed a full testing program by the International Code Council (ICC) in Miami, FL for wind load and hurricane approvals, exceeding rigorous standards required in that state–the most stringent in the US. “In some cases, we outperformed the requirements by 150 per cent, and have been granted approval to build not only homes, but hospitals and even schools with our structural light-gauge SteelFX steel framing and AAC [autoclave aerated concrete] panel system,” Gross says.
Where the goods go
Grand Bahama’s location on international shipping routes and its modern port facilities are making it an important major trans-shipment centre.
Freeport Container Port Trans-shipment Volume
US Gulf Coast 15%
South America 20%
US East Coast 8%
US West Coast 1%
Central America 5%
Asia, South Africa, Australia, New Zealand 5%
Source: Grand Bahama Port Authority