HARDI: Galvanized Prices in Play

“Publicly the mills are trying to get an increase, but they are still negotiating to try to fill their order books,” reported one HARDI member.

The price of galvanized has slid by about $1.50/cwt in the past month, according to leading indexes. “There are a lot of fundamentals pointing to a softening market, but the mills announced increases to put a stake in the ground and help prices find a bottom,” said another wholesaler.

John Packard, publisher of Steel Market Update, noted that ArcelorMittal was the first mill to announce a price hike, offering guidance of $825 per ton as the base for galvanized steel. Other mills followed with increases of $40 per ton. “The question now is will they collect all or only part of it? How strong is their order book?”

With zinc trading at $1.47 per pound today and as high as $1.53 per pound earlier this month, the mills that have not yet announced new coating extras [Nucor, U.S. Steel] could do so at any time, though there have been no new announcements since NLMK USA started the ball rolling one month ago, Packard noted.

Working against the mill price hikes is a decline in the price of scrap. The price of high-grade busheling dipped by $40 per ton earlier this month and other grades by $30 per ton. That trend may be short-lived, Packard added. “Usually scrap tightens up again as we get close to the winter months due to issues with collection.”

Competition from foreign suppliers is down as import levels have declined, though there reportedly are still countries offering galvanized at $60 to $80 per ton cheaper than domestic for ultra light gauge and specialty products, Packard said.

Many steel buyers remain reluctant to place foreign orders that might run afoul of trade restrictions in the U.S. The Section 232 investigation remains up in the air, Packard reported. In response to a backlash from steel-consuming industries, the Trump administration put the national security trade action on the back burner while it tackled tax reform. “Based on what I am seeing on the tax reform debate, I think 232 will definitely wait until next year,” Packard said. U.S. Department of Commerce Secretary Wilbur Ross has until late January to make a recommendation to the president on Section 232 or the president can cancel the investigation and reset the clock.

Service center inventories of coated steel are around 2.2 months of supply, according to the Metals Service Center Institute (MSCI). Steel Market Update’s data shows them higher at roughly 2.8 months. The HARDI members generally agreed that inventory levels are adequate for the present demand, and most distributors are in no hurry to stock up while galvanized prices are in a state of flux. “We are surveying the current market to see where the new round of increases shakes out. We definitely have enough inventory to service our business,” said one southern wholesaler.

Most HARDI members reported flat to decent demand for their products. One said he expects to sell fewer pounds this year, but to see better revenues due to higher average prices in 2017. A distributor in the Southeast said his business was down in September due to fallout from the hurricanes, but October has rebounded. “In general, most of our customers are optimistic and have work, but I have concerns about the direction of the market [and prices],” he said.

Steel Market Update participates in a monthly steel conference call hosted by HARDI. The call is dedicated to a better understanding of the galvanized steel market. The participants are HARDI member companies who are wholesalers, service centers and manufacturing companies that either buy or sell galvanized sheet products used in the HVAC industry.

Written by Tim Triplett, Tim@SteelMarketUpdate.com