HARDI Wholesalers Report Mixed Results for Galvanized Pricing

No wholesaler believed there would be much of a boomerang effect as the weather improves in the coming weeks.

The report card regarding demand remains at a D+ to a C in most, but not all, regions of the country.

Most of the wholesalers continue to be subdued regarding demand for their products. With the exception of one dealer on the West Coast and one in the Wisconsin area, the other wholesalers are reporting low single digit growth to stagnate growth for 2014. Both Oregon and Wisconsin dealers reported strong demand in their areas. One Oregon wholesaler reported that they were “busy” and there continues to be a “fair amount of new work and that their company was “bidding a lot of new jobs.” In Wisconsin one of the HARDI member companies reported that the local sheet metal workers union was having difficulties filling positions. On the flip side, one of the wholesalers in the Washington, D.C. area reported their business to be quite slow.

The economists at the Institute for Trend Research which work in tandem with HARDI members is forecasting a mild decline in business for the second half 2014.

HARDI members reported mild reductions in steel prices out of their mill suppliers compared to one month earlier. One of the wholesalers in the Southeast reported that no one was buying at the higher end of the SMU price range on galvanized ($39.00/cwt base) and the offers were closer to the low end of our range ($37.50 last week) or slightly below.

A service center on the call confirmed they are seeing weakness out of the mini-mills and conversion mills but not so much out of the integrated mills which have strong automotive order books. They told the group:

“The market has softened, no denying that, but at the same time we have to look at what is driving that.  For us we are looking at the mills as having had stronger order books in November December and an influx  [or orders] that typically is slower [at that time of year].  Also with the weakness we have seen the weather patterns affecting just about the whole country.  Normally, those of us in north or northeast are used to slowdowns in construction or some slowdowns in overall demand but nobody seems to be exempt from that right now.  You can definitely see it is having an impact on order books, its having an impact on our shipments, I’m sure everybody on this call has seen an impact on your shipments.  Look at strength at mills, how strong their order books are at the fully integrated mills as their scope of business is completely different from converters and the minis.  Overall though we still think the industry is heading in positive direction for 2014. And what I think we have to come to grips with is that a stronger market doesn’t mean cycles will go away. We could still have strength, and we could still be heading upward but we will still have these little cycles take place and a little bit of a waver [in prices].  If you look at ArcelorMittal and their acquisition of TK and look at what US Steel is doing and some of the changes they are making as well as the consolidation in the industry, then there are lot of things that are positive right now.”

The HARDI members in Canada reported their galvanized prices are up 10 percent due to the change in value of the Canadian dollar versus the U.S. dollar. The Canadian dollar was reported to be worth approximately $.90 down from par ($1.00) not that long ago.

A number of the HARDI members complained of “CSPQ” which stands for Competitor Stupid Pricing Quotient. These tend to be non-traditional service centers who have entered the HVAC markets at prices which many times are below the wholesalers cost. An East Coast wholesaler pointed out, “When demand decreases, the CSPQ increases.” A Midwest based wholesaler cited an example for the group when he reported one of the Reliance service centers taking a 40 sheet order from them within the past couple of days. Most service centers traditionally sell in truckload lots. Forty sheets weigh less than 5,000 pounds.

HARDI = Heating, Air-conditioning, Refrigeration Distributors International