Steel Mills

Subdued Wholesalers Report Mills, "Tapping the Brakes"

November 18, 2014

Earlier today Steel Market Update participated in the HARDI steel group conference call which resulted in more questions than answers being raised due to the uncertainty in the galvanized steel markets. The call began with a recap of the price announcements which were made by the domestic mills when AK Steel began the process on the 28th of October. Nucor and ArcelorMittal put price parameters around the increases by informing their customers that the minimum base prices on hot rolled would be $33.00/cwt ($660 per ton) and on cold rolled and galvanized at $39.00/cwt ($780 per ton) plus applicable extras.

The HARDI wholesalers who are buying mill direct told the group that they are not seeing the mills as having collected any of the price increase and they continue to pay either the same price as previous to the announcement. One wholesaler said the mills were “tapping the brakes” in an effort to end the slide in prices.

A large service center who is a HARDI member company told the group that they see the mills as trying to stabilize the market but it is still too early to tell as some mills continue to have December galvanized tons available. This service center also pointed out that the market has become very regional with those mills close to port cities having to work under different competitive pressures than those located around the Great Lakes. He told the group, “It is going to be a test to see how disciplined the mills will be [regarding steel pricing as we move into 2015].”

The energy level was much lower than what SMU has heard on past HARDI conference calls. The wholesalers in the East were reporting “softening demand” and in the Midwest we heard that seasonal issues were being exacerbated by the latest spat of cold and snowy weather. One Midwest wholesaler told the group, “Seasonality – it’s getting to be that time. People are starting to wind their jobs down earlier than usual.”

The HARDI wholesalers sell galvanized steel sheet and coils into the mechanical contractors who are involved in the HVAC industry for residential and commercial applications. The wholesalers have been complaining about “non-traditional” service centers competing against the wholesalers for the mechanical contractors business. Prices continue to be quite competitive with one wholesaler located in the Central Plains area of the country telling the group, “We’ve got customers buying 2 coils at the same price that I am paying for 4 truckloads.” He went on to tell the group that the customer said the steel was not foreign but based on the pricing, “…it has to be.”

Another wholesaler said the non-traditional service centers pricing strategy was “goofy” even after giving them a competitive allowance due to their size or their ability to buy foreign versus domestic steel.

There was a discussion about foreign versus domestic steel and whether the contractors were requesting domestically made steel. One wholesaler reported that their union contractors were requesting domestically produced steel. However most wholesalers reported that the “don’t ask/don’t tell” rule was in force when it came to galvanized steel sheet and coil. “They don’t want to know, they just want a cheap price,” is what one of the wholesalers said to the group.

HARDI – which stands for Heating, Air-conditioning, Refrigeration Distributors International will hold their annual conference in San Antonio, Texas on December 6-9, 2015. You can visit the HARDI website for more information. Steel Market Update will be speaking at the conference on December 7th.