Steel Mills

HARDI Wholesalers Work Down Inventories in Competitive Resale Market

October 20, 2015

The HARDI wholesalers held their monthly galvanized steel conference call earlier today. During the call the wholesalers provided insights into business conditions affecting the companies and discussed the status of the flat rolled steel markets. HARDI wholesalers supply galvanized sheet and coil steels to the mechanical contractors associated with residential and commercial construction in North America.

A number of the wholesalers reported the steel mills and service centers as being flexible when it comes to pricing new orders. One of the wholesalers located in the Southeast told the group that the steel mills were, “…more willing to negotiate and we are seeing prices that we have not seen since 2008.”

At the same time the wholesalers pointed to a continuation of the steel service centers as willing to “turn inventory” in a manner that one of the wholesalers coined as being “a fire sale.”

A Midwest based wholesaler reported that their business was “down slightly” and their biggest concern is the sliding prices of galvanized steel “which is affecting our bottom and top line.” This wholesaler reported prices as being better than the best numbers seen during 2nd quarter. They also reported various mills as asking for future orders that they would then roll today. This practice was considered “dangerous” as they see galvanized prices as continuing to slide for awhile. This wholesaler pointed to the spread between hot rolled indices and those of coated products as being “wider than normal and is an indicator that prices will go down.”

Most of the wholesalers on the call reported inventories as being balanced and there were no discussions about building inventories from here. Balanced, according to one wholesaler, was in the 2.0 to 2.5 months worth of inventory on the floor range.

At the same time one of the wholesalers in the Southeast wished that he didn’t have any inventory on the floor so he could replace with the latest price levels (versus selling off depreciating inventory).

A wholesaler located in the Mid-Atlantic region told the group that they “refuse to participate in the low price levels being offered” in his region. A number of the wholesalers reported quote activity as being down but at fair or reasonable levels. “The business is there,” a Rocky Mountain wholesaler reported. He went on to say, “We are not getting any major surges in orders. Our traditional-historical buyers are there so there is movement.”

A number of those on the call pointed to the uncertainty that exists in the markets due to the ongoing USW/ArcelorMittal & US Steel labor negotiations as well as the uncertainty surrounding the trade cases and how they will be resolved in the coming months.

Two callers who are well known to be buyers of foreign steel advised the group that they were no longer buying foreign products due to the trade cases and the ability to buy domestic steel at competitive numbers.

HARDI = Heating, Air-conditioning, Refrigeration Distributors International