Higher Steel Prices Challenge HARDI Members

“We’re seeing higher steel prices at the mill and service center level, but have yet to really realize it at the street level,” said one HARDI member. “I am hopeful that this month we will start to see the street price increase as well.”

Orders for galvanized steel and other products have been relatively strong, but higher prices may affect future demand, said another concerned executive. “But we have no other choice but to increase prices.”

“Demand has been fairly consistent for the last couple of months. I don’t see this as more than a restocking situation. Our buys are based on our weekly needs, not above and beyond. We would love to get the numbers up [from customers], but I don’t see this as a long-term event,” said another source.

One distributor pointed to an analyst’s report that cautioned buyers about replenishing inventories at a hot rolled coil price that exceeds $600-625 per ton. Rising steel prices may be pulling demand forward, he said, setting the stage for a buyers’ strike in the months ahead. “We have taken our [conservative] position and are sitting back to see what happens,” he said.

Added one HARDI member: “We are holding back from buying. I think we will see things start to come back down again.”

John Packard, president and publisher of Steel Market Update, told the trade group he expects the mills to announce an additional price increase or two during August, “whatever they can to get people to buy.”

Steel Market Update data shows the current galvanized steel price averaging $765 per ton ($38.25/cwt), with SMU’s Steel Price Momentum Indicator pointing Higher.

Competition from imports is modest. Government data shows imports of galvanized products declined to 179,000 tons in June, down from 215,000 tons in May. July imports are projected slightly higher than June at 208,000 tons—still well below the 12-month moving average of 235,000 tons per month.

Now that steel prices in the U.S. are up, HARDI members report more aggressive import offers from traders. “We’re not buying any, but we’re definitely seeing importers dropping prices and trying to be competitive with the domestic mills,” said one exec. It’s unclear how much steel is coming in from Canada and Mexico now that those two countries are no longer subject to the Section 232 tariffs. “We are being told the Mexican mills are doing a self-imposed quota, not much increase to stay under the radar,” commented one source.

“Domestic steel prices are well below international prices, which is not normal. A $100 per ton runup is still possible to get us back up to normal levels,” Packard said. “The mills have the ability to push prices up further, and I think you will see even fewer imports in the third and fourth quarters.”

So far, the market is supporting at least a portion of the mill increases. SMU’s polls of service centers and OEMs show that about half the mills are still open to negotiation, which would seem to run contrary to their interest in collecting higher prices. “But you have to remember there is a lot of room for them to negotiate since there is $120 in play. It depends on the starting point,” Packard noted.

Overall, the mood among the HARDI members is generally optimistic as they expect to remain busy at least through the end of the year. The majority expect steel prices to increase by a further $1-2/cwt in the next 30 days, though more than one-third feel prices could remain flat or even decline.

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.