HARDI: Galvanized Outlook Mostly Positive for 2018

“Mill prices don’t jibe with pricing to the contractors at all,” said one HARDI member. “Market pricing from the mill does not match the street pricing,” agreed another. One characterized price discounting in a rising market as “stupidity” and said unprofessional competitors “are more concerned about getting the sale than getting a sale that makes sense.”

Market fundamentals should be supportive of the recent mill price hikes on flat rolled steel. An unusually strong December led into an equally strong January in terms of galvanized sales. Galvanized imports declined from around 300,000 tons per month to nearly 200,000 tons by the end of the year. Scrap prices jumped by $20 per gross ton in January and are expected to increase again in February. The price of zinc hit $1.55 per pound leading the mills to boost their coating extras effective Jan 1. Yet mill lead times remain fairly short and distributor inventories fairly high, which contradicts other indicators and casts some doubt on true demand levels, the group said.

Some HARDI members expressed concerns about the uncertainty created by pending trade cases. On the trade watch is a final ruling on Vietnam circumvention. In its preliminary ruling, the ITC found that Chinese substrate processed in Vietnam into cold rolled and coated products did not change their country of origin, and thus Vietnam had abetted China in circumventing U.S. duties. New duties are likely on certain imports from Vietnam, though it is threatening a countersuit. “This circumvention case is big. It will set a precedent. Other countries are on notice. I’m sure Russia and Brazil are keeping a close eye on what’s happening,” commented one distributor.

“We are trying to weigh our inventory against the potential effect from Section 232,” added another distributor, which could further restrict steel imports and tighten supplies.

John Packard, publisher of Steel Market Update, reported that the Commerce Department has delivered its Section 232 report on steel’s role in national security to the White House, but there is no word on exactly when or how President Trump may act (Trump has to issue his findings 90 days after receiving the report from the DOC). Many parties, including the agriculture industry and Department of Defense, oppose big tariffs or quotas, which might prompt a trade war with other countries. Dan DiMicco, former head of Nucor Steel and now a trade advisor to the president, feels the U.S. needs to take strong, punitive action to break the cycle of unfairly traded imports once and for all. “If DiMicco is the last one to have the president’s ear, he could do something dramatic,” Packard said.

HARDI members also reported some issues with trucking now that new rules are in place requiring electronic logs and restricting drivers’ hours behind the wheel. “It’s been mostly delays in receiving material, not necessarily higher costs,” said one executive.

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