Steel Products

HARDI Members: 'Prices Could Go Either Way'

October 16, 2018

With the market sending mixed signals, distributors of HVAC products are keeping inventories lean as they wait to see if the price increase just announced by the steel mills gains any traction. “You can make a case for prices to go either way,” said one member of the Heating, Air-conditioning and Refrigeration Distributors International (HARDI) during the trade group’s monthly conference call on Tuesday.

Last week, most of the major flat rolled mills announced a price hike of $40 per ton on hot rolled, cold rolled and galvanized products. The Section 232 tariffs remain in place, keeping a lid on competition from steel imports. And the price of steel inputs, including iron ore, scrap and zinc, are all up. All those factors point to a likely rise in steel prices.

Also announced last week was a new labor agreement between the United Steelworkers and U.S. Steel, averting a possible work stoppage that might have tightened steel supplies. With the mills producing steel at 80 percent of capacity, supplies are ample and lead times on spot orders remain short. As of last week, both mills and service centers still showed some willingness to negotiate on price, even after the first announcement by Nucor, noted one executive on the call. Those factors point to the likelihood of flat or further declining steel prices. Spot pricing on galvanized steel has dropped by about $4/cwt from its peak a few months ago.

“Our expectation over the next week or two is that we should get a feel for whether the price increases are holding, partially holding, or failing and prices are still going down,” said John Packard, president and publisher of Steel Market Update.

Several said they believe the mills are trying to put a floor on the falling prices. “I think it will have an impact. The mills may not get all they want, but they could get a little. But it won’t have an effect until January or February,” predicted one HARDI member.

“Personally, I think we will see a lower adjustment in the CRU, but it will still settle in the $40s. We will feel better once we start solidifying some of our mill negotiations for next year,” said another executive.

“Section 232 is working, in my opinion. It is keeping the numbers up to where the domestic mills can definitely compete if they choose to,” commented yet another distributor.

There were some early concerns expressed during the conference call. A number of the distributors and at least one service center reported September sales below expectations. Demand was pegged as being “average” by a number of the wholesalers located across the United States. An East Coast distributor told the group, “I am not too excited on increases holding. We are not exceptionally bullish or bearish…however, the excitement is waning.”

The distributors pointed to mill lead times as being the one market item to watch. Inventories are being kept lean. One of the service centers on the call reported that their company was having “no issues getting steel.”

Steel Market Update will continue to watch lead times and negotiations and will be reporting on these two critical items in Thursday evening’s issue of our executive level newsletter.

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.