“Frustrating Climate” for HARDI Wholesalers

Demand is strong in most regions of the country, which is very positive, but steel is hard to come by with little available on the spot market, members reported. Mill lead times are extremely long and deliveries are often weeks late. Inventories for most distributors are much tighter than normal, making it a challenge to allocate enough steel to each customer to keep them all happy. “It’s comforting to hear that everyone is going through the same struggles,” commented another exec on the call.

Steel Market Update’s check of the market this week puts galvanized prices in a range from $1,440 to $1,500 per ton, or an average of around $1,470—up 29% since the beginning of the year and more than double the $630 per ton at the low point in 2020 last July.

John Packard, president and publisher of Steel Market Update, told the group that the record-high galvanized prices promise to stay elevated at least for the short term due to the continuing lack of supply. “Effectively, the mills are not negotiating on price at all, they are dictating the price on all products,” he said.

Additional tonnage from Steel Dynamics’ new mill in Texas and expansions in the works at Nucor and North Star BlueScope, among other mills, will ease the tight supplies and stem the price increases, but probably not until the third or fourth quarter, Packard said.

One midwestern wholesaler said his company has managed to source enough material to service its core customers, but its inventories are below normal and don’t offer much wiggle room. “We even had one customer, a Buy American kind of guy, who requested foreign material, which shows some of the frustrations at the end-user level regarding price increases from the domestics.”

“We are struggling with late mill orders,” complained another exec on the call. “About 65% of the steel we have received in Q1 has been at least a month late, which has created problems as we are hand to mouth on some items.”

Average selling prices in the first quarter were at record levels for another HARDI member, though he is concerned about holes in his inventory. He likewise has seen no improvement in mill deliveries, which are still 4-6 weeks late. “We are taking care of the right customers, making sure everyone gets their average orders, though we can’t give any one any more without shorting someone else,” he said. He added that the high prices have not forced the cancellation or postponement of any commercial jobs, at least so far.

One manufacturer on the call said it has been especially tough to source material for his operation lately, especially due to the bad winter weather in Texas. “We’ve still been able to pass along the price increases on all our materials—steel, plastic, fiberglass. It’s both a good and a bad problem to have. We see it both ways,” he said.

Most of the HARDI members—roughly eight out of 10 responding to a flash poll on the call— expect galvanized prices to increase by a further $1-2/cwt or $20-40 per ton over the next 30 days. Looking to the future, the prevailing sentiment is reversed, with a clear majority predicting prices will be down significantly six months from now. About one-third foresee a sharp decline of $4-6/cwt or $80-120 per ton, if not more, by the fourth quarter. When will galv prices begin to fall? Not until at least June, said the wholesalers, and more likely July or August.

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, wholesalers who supply products to the construction markets. Also on the call are service centers and manufacturing companies that either buy or sell galvanized sheet and coil products used in the HVAC industry and are suppliers to the HARDI member companies.

By Tim Triplett, Tim@SteelMarketUpdate.com