Steel Products Prices North America

Change Unlikely in Coating Extras

June 29, 2017

In early June, the price of zinc had nosed down to about $1.10 per pound, raising hopes among buyers of galvanized steel that the mills might consider rolling back their coating extras–the extras mills charge when applying zinc to cold rolled or hot rolled substrate to produce galvanized products. Those hopes were short-lived as the market price for zinc rose steadily throughout the month to $1.25 per pound as of June 28.

What is driving the price of zinc? The value of the dollar has been weakening against other currencies since April, giving a boost to commodities of all types. Now the market’s concern is if and when the cost of coatings might go up. The last hike in the mill extras took effect on Jan. 3, 2017, when the cost of zinc was around $1.22 per pound.

Zinc inventories have been dropping, according to data researched out of www.Kitco.com. Current inventories are at 290,000 metric tons and have been declining since early October 2016 when stocks were reported to be just under 460,000 metric tons.

“With the giddy mood the mills are in about possible Section 232 trade action, they likely would not change anything anytime soon,” said one galvanized steel buyer when asked if zinc extras might fall. Now the question is, will zinc on the LME continue to move higher and at what point do steel buyers need to be concerned about having to pay even more for their galvanized steel?