HARDI: Buyers Keep Capitulating to High Steel Tags

“It used to be easy to get steel and hard to make the sale. Today it’s the opposite,” said one HARDI member. “Demand has remained strong, and we can sell every pound of steel we can get our hands on. Contractors are angry with us—shooting the messenger of high-priced steel—but they continue to buy. But we are starting to hear contractors talking about projects being delayed due to the lack of availability and steel pricing.”

The base price of galvanized steel has tripled since the bottom of the market last summer and now stands at around $1,730 per ton ($86.50/cwt), according to Steel Market Update’s latest data. Galv prices rose by more than $150 a ton over just the last 30 days. For wholesalers of galvanized steel products like the HARDI members, that is both an opportunity and a challenge. Margins are high, but so is the inventory risk should prices suddenly correct.

HARDI members predict that galvanized steel prices will continue to rise in the short and long term, according to a flash poll of those on the call. Thirty days from now, most expect galv prices to be $40-80 per ton higher. Six months from now, the majority view is for prices to be up anywhere from $40-120 per ton. When do they expect prices to begin falling? Nearly all predict October or later.

“The numbers are ridiculous. Every week they hit a new high,” said John Packard, president and publisher of Steel Market Update. With lead times on spot orders of coated steel out to 13-15 weeks, and the price of zinc up to $1.38 per pound (prompting at least one mill to raise its coating extras), market momentum continues to point toward even higher prices.

Recent SMU survey data shows that nearly all service centers continue to raise prices. And 85% say, given the strong demand, they are having no trouble passing along the increases to their customers. At a current reading of +72, near the all-time high, SMU’s Steel Buyers Sentiment Index shows that service centers are extremely optimistic about their prospects in today’s high-priced environment.

Where will hot rolled prices peak? Most buyers see more room for them to rise, and 22% of the those responding to SMU’s survey last week believe prices could go up another $200 per ton before reaching the tipping point. “That’s scary, but it would be scarier if they were expecting the price to go down by $200 a ton,” Packard added.

One wholesaler said building permits are up by 20-30% in his region. “We are really keeping our ears to the ground on whether there will be any delays in the second half. There continues to be sticker shock on pricing, but availability trumps pricing at this point.”

The trucking shortage has worsened lead times. The mills are having a hard time moving their materials, noted one exec on the call. “For foreign mills, getting trucks under their steel once it hits the docks turns into a bidding contest on who wants to pay the truckers more. The fuel shortage in the South did not help.”

“On foreign orders, if they say it will be here in October, plan on December,” commented one participant. “I expect the government to pass an infrastructure bill, and that is going to create even more of a shortage of material. The last two offers I got, I had to respond within 30 minutes to secure the material.”

Added another: “Contractors are more concerned about getting steel than the price they pay for it. I have not heard of any large projects being cancelled or delayed significantly, which is surprising considering the price of everything.”

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