Steel Mills

HARDI Wholesalers Waiting to See What Happens Next

August 26, 2014

There were no surprises raised during the most recent HARDI steel conference call conducted earlier this morning (Tuesday, August 26th). There were no surprises because on the previous call, held in July, the galvanized steel group members discussed the potential for new coating extras as zinc prices rose above $1.00 per pound.

As anticipated back in July, the domestic steel mills have begun raising coating extras which creates a major impact for HARDI wholesalers who sell galvanized sheet and coils to the mechanical contractors working on commercial and residential construction projects. Most of the products sold are lighter than 16 gauge (.0575”) and can go as light as .012” for furnace pipe and fittings.

Although not all mills have made coating extra announcements, it is a foregone conclusion that all the mills will attempt to collect new coating extras. One of the Midwest based wholesalers told the group that one of their suppliers was adjusting the base price slightly to lessen the impact of the new extras but others on the call noted, “The G90 increase is a significant one…It has been oddly quiet and there has not been a lot of chatter [in the marketplace] about it.”

SMU pointed out that the 26 gauge (.0187”) G90 galvanized extras had increased by $1.50/cwt ($30 per ton) out of Nucor and by $1.75/cwt ($35 per ton) out of US Steel.

A service center on the call noted that the coating increases were as little as $.25/cwt ($5 per ton) on lighter coating weights and heavier gauges to as much as $2.25/cwt or more ($45 per ton).

Another area of concern to the wholesalers was centered on the possibility of a trade case (dumping suit) being filed against galvanized steel producers out of Asia. One of the service centers on the call told the group, “The trade cases right now have a psychological impact. In some cases we are not receiving quotes…some are telling us that we are responsible for duties…and there is a potential for cancellation. This makes it hard to plan out 100 to 120 days into the future.”

The service center reminded the group that they are bullish on the market and where prices will go on galvanized will depend on whether or not there are trade cases.

A couple of the wholesalers reported that they do not believe prices will take off. “I have a tough time believing that base prices will stay where they are if zinc prices are going up. I don’t fear prices will take off,” is how one Southern wholesaler put it to the group.

The wholesalers reported galvanized spot prices out of the domestic mills have essentially been treading water for the past few weeks (moving sideways). Even so, no one admitted to building inventory at this point in time. A number reported they are receiving inventories right now from a build conducted a couple of months back and one wholesaler told the group that they were “sitting on their hands” as they waited to see what direction the market would move next.

Wholesalers continue to lament about lower margins. One wholesaler told the group their business was up 9 percent but their margins were down by 1 percent.

As a group the HARDI wholesalers were much more bullish on the market as many reported good business levels for the months of June and July. We did gather that there was some weakening of these levels in August but, even so, business was much better than one year ago.

HARDI = Heating, Air-conditioning, Refrigeration, Distributors International. Steel Market Update is a HARDI member company and participates in their steel group’s monthly steel conference call.