HARDI Wholesalers Report Demand Beginning to Tail Off

The group spoke about the supply issues which are in the process of being resolved at a number of mills but excess tonnage has not been offered into the marketplace.  AK Steel was discussed and one of the service centers on the call told the group that AK Steel’s lead times on HDG (hot dipped galvanized) are out 7.5 weeks. They reported that the mill is still catching up on their contract orders and has no spot tons available.

One of the Midwest wholesalers told the group, “I guess I am a little less bullish but there have not been any significant price reductions that I am aware of. If we continue to have supply constraints maybe we will have somewhat of a flat market. I personally would be very surprised if the mills were successful on getting a price increase….”

The group was canvassed to see how they are seeing demand from their HVAC mechanical contractors. Those in the Southeast, Mid-Atlantic, New York and Midwest reported June and July as being very strong business months, August was reported as not being a good month and September to date is OK.  One wholesaler told the group, “Demand is good, not great…and September has started off slow but acceptable.”

In the Upper Midwest one wholesaler reported demand as being tepid at best.  On the West Coast a wholesaler advised the group that their business was strong and they expected 2014 to be even stronger.

The group continued to mention how market prices – the prices at which material is being sold into the mechanical contractors – continue to be low.  One wholesaler in the Southeast complained, “The competition has gotten more aggressive in the last two weeks.”  Another wholesaler located in the Mid-Atlantic region told the group, “The price I can buy from SDI is the selling price in the marketplace.”

Out of the Midwest and Southwest the complaints about competition included new non-traditional players which compound the pricing problems seen by the wholesalers in those regions.

A Southeastern based wholesaler told the group, “I would say there is a disconnect between conversations about mill prices and what they are selling out in the market. Selling prices [distributors] for September are at or below what they [mills] are talking about for October. This indicates to me people are working off old deals and are not expecting prices to go up. I’m nervous about where [prices] are going to go. I think it may be stable but I think it may start to fall in November or maybe December – but I think it will fall and fall a good bit.”

HARDI = Heating, Air-conditioning, Refrigeration Distributors International.