Simpson Manufacturing says the steel it turns into Strong-Tie connectors costs more than 50% more than it did a year ago, the highest level in over four years. The Pleasanton, Calif., company reported third-quarter net sales of $638.1 million on Oct. 26, up 2.3%, while gross margin slipped to 45.7% from 46.1%. CEO Mike Olosky told analysts more pricing actions are coming “in the coming weeks.”
For framers, truss plants and lumberyards, that’s the number that matters. Simpson’s CFO Matt Dunn said new pricing typically takes effect in early January, so connector and fastener bids for spring work should carry a fresh increase.
Simpson Manufacturing steel costs hit margins
The quarter itself held up better than the steel bill. North American sales rose 3.8% to $502.0 million, which the company’s earnings release credits mainly to price increases and higher unit volumes. North American gross margin dipped to 48.4% from 48.7% on material, labor and freight costs. Europe went the other way: sales fell 3.4% to $129.9 million on lower volumes.
Simpson has been living off cheaper metal. It bought a large amount of steel a little over a year ago and has been working through it, Dunn said on the call. That cushion is thinning. Total inventory was $511.9 million at Sept. 30, down $82.3 million since Dec. 31, and North American pounds on hand are down 31.5%. The company is now buying closer to just-in-time, taking what Dunn called “a little more of a bite-sized approach” until prices settle.
The guidance shows where that’s headed. Dunn put fourth-quarter operating margin “14-ish,” maybe upper 13%, against 22.1% in the third quarter. Full-year consolidated operating margin guidance is 20.0% to 20.5%, and that includes an $11.0 million gain on a vacant land sale in Stockton, Calif.
Where connector demand is still growing
Residential volumes grew low single digits, with multifamily a relative bright spot. West Coast and Southern starts are down and the Northeast is up, according to the call transcript. Commercial grew high single digits on cold-formed steel, anchoring and data center work. OEM sales grew double digits, led by mass timber. National retail volume fell mid single digits.
Simpson says North American volumes ran about 400 basis points ahead of a 5% trailing decline in single-family starts. Olosky also claimed that 98% of dealers carrying the relevant product lines already buy from Simpson. That’s a company figure, and it cuts both ways: there isn’t much share left to take, so growth has to come from price and content.
What steel buyers should expect in 2027
Simpson in-sourced heat treating and fastener coating at its Gallatin, Tenn., plant this year, and Dunn said stock levels should normalize around the turn of 2027. Which SKUs get made in Gallatin versus sourced from Taiwan next year will depend on steel prices and tariffs.
None of this is happening in isolation. Mill pricing has climbed for weeks, with Nucor’s spot hot-rolled price at $1,255 a ton earlier this month. Simpson didn’t name a 2027 percentage, but it says it prices to protect gross margin over time. With steel up by half and Strong-Tie in nearly every dealer, expect January’s increase to stick.