Steel Mills

HARDI Wholesalers Becoming More Pessimistic About Galvanized Market

September 22, 2015

Steel Market Update participates in a monthly steel conference call with HARDI wholesalers who supply galvanized sheet and coil products to the HVAC mechanical contractors across the United States and Canada. The wholesalers also supply other products such as air conditioners, furnaces and many other products to companies working on residential, multi-family and commercial construction jobs.

HARDI wholesalers reported business as being “sluggish” and they were particularly less enthusiastic than what we had been hearing over the previous few months.

They also reported service centers as aggressively selling steel into the traditional wholesaler markets. One wholesaler described the situation as follows:

“Seems to have been a little sluggish compared to last few months and there seems to be a more significant aggressiveness at service center level in terms of pricing that just makes me a little more pessimistic about just the health of trying to sell steel at good margins. We just presented a lot of negatives and certainly there is no indication that steel prices are going to climb. Volume is okay but it is off a little bit. Certainly selling prices are getting really dirty.”

Other wholesalers echoed those sentiments as they reported demand as slowing with galvanized steel prices trending lower which creates a situation where the end customer does not want to invest in steel that may be worth less in a few weeks. He told the group, “ From a top line perspective due to slower demand big jobs finishing up and price of steel trending down, and no one wants to buy when it is in that direction. So they are not as apt to buy as they once were and also we are selling at tighter margins so the bottom line is being doubly affected.”

We asked the wholesaler if this was a normal seasonal trend. He responded, “Typically September is usually a strong month so I don’t think it is due to seasonality.”

SMU discussed the situation regarding negotiations between the United Steelworkers Union and US Steel and ArcelorMittal. Both companies are working without contracts right now and there is a concern that any shutdown of either location could produce problems within the galvanized industry.

We also discussed the inventory situation and our understanding is service centers continue to be over-inventoried due to the slowdown in demand and the continuation of foreign imports which are just now starting to taper off.

One of the Canadian manufacturing companies asked about the status of the antidumping suits and if (when) this suit could impact pricing or supply (or both). We reminded the HARDI members that the key date is November 2nd when the Preliminary Determination will be made on the CORE (corrosion resistant) case. At this point importers of record will be responsible for potential duties and, if critical circumstances are found, the date of responsibility could be moved up by 90 days.

In either case, the countries affected are mostly removed from the market and other players have already taken their place.

The last item discussed was the issue of zinc pricing and the galvanized coating extras. The wholesalers reported that the domestic mills were not overly receptive to discussing changes in their extras. We were asked if the long term forecast was for zinc pricing to spike in the future. SMU responded that we do not have a long term forecast but we defer to Lisa Reisman who spoke at our conference in early September and presented a bearish case for zinc over the next year or so. The wholesalers were reminded to keep the eye on the zinc market and to continue to speak to their suppliers on the subject.