Steel Mills

HARDI Wholesalers Still Negative on Steel Demand

January 14, 2014

Steel Market Update (SMU) participates in a monthly steel conference call with the wholesalers associated with HARDI. The HARDI wholesalers supply the residential and commercial mechanical contractors associated with the HVAC (heating, ventilation and air-conditioning) industry. The wholesalers on this monthly conference call supply or manufacture products out of galvanized sheet and coil and try to share information about the galvanized steel market with other wholesalers and HARDI member companies.

The cold weather experienced throughout the United States and Canada this past week, coupled with the New Year’s Holiday landing in the middle of the week, impacted shipments out of the wholesalers and related companies during the first two weeks of the New Year. HARDI members reported shipping problems with delays in the receipt of trucks carrying steel. Many of the companies in the Northeast and Midwest reported having facilities down for one or two days due to the extreme cold weather.

There were mixed messages received regarding business levels over the past couple of weeks. One service center on the call reported they were back to business as usual. Actually, they reported their spot galvanized business as being much like it was back in the early to mid 2000’s. Their company has been receiving inquiries from OEM’s and service centers looking for multiple loads of a product. This one service center reported they were receiving orders from a number of these companies which indicated to them that these orders may be part of the changes in the 2014 contracts with some companies opting for spot vs. contract pricing. This service center also reported a continuation of low inventories.

From the wholesaler perspective, SMU heard that a number of companies ordered extra inventory prior to the Thanksgiving and Christmas/New Year Holidays. A number of the wholesalers reported they were living off the previously purchased inventory in anticipation of prices dropping in the future. When asked if the $40.50/cwt base galvanized is reasonable one of the wholesalers told the group, “Not if you want to make money.”

A couple of the wholesalers responded to questions about the strength of the HVAC industry with, “It is difficult to get real bullish when demand is so weak. Demand is not strong.”

One of the service centers reported that they were seeing less competition than there were seeing 2-3 months ago. They reported a number of the offending service centers have been closing or combining locations and some of the “non-traditional” distributors into the HVAC industry have dropped off the radar screen.

There is also some consolidation of HVAC supply with the purchase of Flat Rolled Steel, Inc. by Majestic Steel cited as one example. With consolidation comes a more limited supply base.

Looking at the HVAC markets – especially the commercial construction portion of the HVAC market – the HARDI wholesalers were not optimistic for 2014.

HARDI = Heating, Air-conditioning, Refrigeration Distributors International