Galvanized Prices Continue to Rally

Adding the $130 per ton worth of price increases to our range from that week our range should be $29.75/cwt on the low end and $31.50/cwt on the high end of our range.

Using AK Steel’s original December number of $27.50/cwt and adding an additional $90 per ton (three $30 per ton increases during January-March) we get a base price on galvanized of $32.00/cwt.

Today we are hearing galvanized spot numbers running from a low of $29.75/cwt to $31.50/cwt (and we expect that AK Steel is at $32.00/cwt but with little to no tons to sell).

Galvanized will continued to be strong for a number of reasons.

1) The products produced out of galvanized have, for the most part, seen improving demand. This includes automotive and construction markets.

2) Service center inventories have been dropping. MSCI had galvanized inventories at 1.78 months supply at the end of February. Normal would be closer to 2.25-2.5 months.

3) Foreign steel imports of galvanized steel are being cut significantly compared to 2014 and 2015 run rates.

4) Galvanized steel mills are running essentially at capacity.

5) Galvanized lead times are out to late May or into June production (and many mills are on an “inquire only” or “order books are closed” basis).

6) We are also hearing the word “allocation” when speaking to some galvanized buyers who are complaining of not being able to get their “full allocation” at what they thought their price was going to be for April or May production.

7) Foreign steel pricing is being quoted at higher numbers and some of the traditional low priced suppliers are out of the market due to the dumping suits.

SMU does not expect a slowdown in galvanized order books until the summer automotive shutdowns in July/August. We believe this means we should have a continued strong pricing situation for the domestic mills over the next two months.