HARDI: Is Bump in the Coating Extras Overdue?

HARDI members report that mill lead times are still fairly short. Galvanized imports in September and October we well below the 12-month average. Inventory levels are balanced, if not a bit high. “There are a lot of mixed fundamentals. I don’t see anything supporting the mills’ case for further price increases other than the long shot of the trade cases,” commented another HARDI member.

Offering an update on the status of various trade cases, John Packard, publisher of Steel Market Update, noted that three out of four complaints in U.S. Steel’s Section 337 case against Chinese exporters have been rejected by the court. Only its claim of illegal price fixing by Chinese competitors is still under judicial review. The Commerce Department has yet to deliver its report on national security for the Section 232 case, which is due to the president no later than mid-January. The president then has 90 days to act. The administration has put Section 232 on the back burner until after it passes complex tax reform legislation, which could take some time. A ruling on the circumvention case in which Chinese steelmakers are accused of shipping steel through Vietnam with only modest alteration along the way in order to circumvent U.S. duties keeps getting postponed by regulators. “The more it gets pushed out, the less likely anything positive will happen as far as the domestic mills are concerned,” Packard said. Reviews of the existing duties on coated steel products are not due until sometime mid to late next year, he added.

Some HARDI members reported a seasonal slowdown in demand, which may be contributing to a heated competitive environment. “Everyone we compete with is in a serious sell mode. The service centers are only looking at how they can move material off their floor,” said one. “In the Northeast, the price competition is unreal. I walk away from more orders than I take,” said another.

Most say they are standing pat on inventory levels despite the upward pressure mills are placing on prices. Steel Market Update new proprietary service center inventories data showed flat roll inventories at about 2.8 months of supply at the end of October, about the same as September.

But one distributor in the Southeast reported that his mill suppliers are less willing to negotiate and are holding firmer than they were 30 days ago. Lean inventories, lower levels of imports and fourth-quarter maintenance outages at some mills promise to tighten supplies and bolster the case for higher prices, he said. “Don’t be surprised if you see not just a base price increase, but a hike in the coating extras. A lot of these mills are quoting off the zinc tables at $1.10 to $1.30 per pound, and zinc has been in the $1.45 to $1.50 range for a while.”

Packard is among those who feel a hike in the zinc coating extra is overdue. “Once the lead times get into January, you will see another base price increase announcement,” he also predicted.

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