Wholesalers Report Growing Optimism While Trucking Problems Persist

One of the service centers on the call reported that their company was seeing pent up demand coming back into the marketplace. Their company was seeing both national and regional distributors who normally rely on their mill suppliers were coming to them for spot tons. “This indicates something in the supply chain has gone astray,” he said, “…We see things remaining very tight for the time being.”

There was no sense of panic from the wholesalers, a number of which reported their inventory levels to be approximately 2.0 months (or less). No one reported being actively buying spot tons at the new pricing.

A number of the wholesalers stated that they were more optimistic about their business for the months of April and through 3rd Quarter 2014. They are starting to see mechanical contractors slowly coming back into the market and needing galvanized steel.

A Midwest based wholesaler told the group, “We are optimistic and having a good April after a pretty cruddy 1st Quarter…Based on conversations we are having with contractors we are optimistic about quarter three business.”

A wholesaler out of the Southeast reported that their company has noticed a slight improvement in their business. Their major concern now was, “I still worry about the fragileness of the market and at what point the prices will begin to drop.”

One Midwest wholesaler discussed the potential for problems with inventories and pricing once we hit the summer months – the typical busy period for many mechanical contractors. “…Sometimes contractors are so accustomed to bitching. I don’t think things are dramatically better, but I think they are better. They have been crying for so long and some of them give excuses and it’s the same old thing, ‘we don’t care if prices are going up’ and ‘we don’t have enough work’ and so on…Contractors are going to wake up and its going to be the middle of summer and they will be quite busy and steel pricing may have gotten away from them and we may see a rush in demand at that time.”

The group reported “marginal” improvement in the competitive situation between themselves and non-traditional service centers.

One of the manufacturers from Canada reported, “Up in Canada, we took quite a beating in first quarter and even the month of April. Hopefully, it is all weather related but, we took a beating right across the country.”

The group also discussed logistic issues they were having with trucking between the domestic mills and their plants as well as issues service centers were having being able to service short lead time delivery requests (most wholesalers have their own trucks for local deliveries).

From the Southeast we heard that the trucking issues had not improved. The specific issues their company was having was due to the lack of availability of trucks at “reasonable rates.” They reported that their mills were reporting material as being ready to ship and the material was sitting there while they waited for a carrier to haul it.

A number of the wholesalers and the service centers on the call reported that trucking companies were “…taking full opportunity to collect higher rates.” One company reported truck rates out of the ports with premiums being asked “70-85 percent higher than their rates were just 12 months ago.”

A second service center advised that their short lead time deliveries were out one to two days longer than normal due to the trucking issues.

The trucking issues and the negotiation of rates – especially for “hot” loads – was making the industry a little tougher to deal with but the various companies are working through it.

As mentioned earlier, none of the wholesalers on the call seemed overly concerned about the production issues at US Steel and did not appear to be concerned about their ability to get steel. The question now appears to be how long will the current market last and when will prices “break” and head lower….

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