HARDI: Good News Outweighs the Bad in Galv Market

Steel supplies remain excruciatingly tight, forcing suppliers to perform a balancing act in parceling out tons to customers. Lead times for spot orders of galvanized from the mills have extended to nearly 11 weeks, putting further strain on the already limited supplies. “The mills have not started to catch up yet. We are keeping all customers on allocation; they can only get what they have been using, not what they may need to grow,” said one wholesaler on the call.

Steel Market Update data puts the current price for galvanized at an average of $1,580 per ton—more than 50% greater than the past decade’s high of $1,020 recorded by SMU in June 2018. SMU’s Price Momentum Indicators continue to point toward higher steel prices over the next 30-60 days, said John Packard, SMU president and publisher. “There is no negotiation going on. The mills are asking for whatever price they want in the spot market.”

Fueled by trillions in government stimulus and proposed infrastructure spending, the U.S. economy and steel demand are forecast to boom for the next few years—an amazing rebound from the pandemic shock in 2020. “Everything seems to be clicking. Even energy is coming back,” Packard said. “We aren’t seeing any tipping points yet in the steel market.”

One HARDI exec noted that it’s difficult to assess how well his company is actually performing. Just comparing sales to the previous period characterized by lower prices and COVID can present a false positive. “You have to look closer to see the true demand,” he said.

He also noted that more contractors are inquiring about getting steel later in the year, which is a promising sign of future demand. “They have steel through Q2, but are looking to lock up steel for Q3 and beyond, based on their [bullish] assessment of the market. But we don’t really have steel to sell to them.”

The HARDI members expressed doubts that the volume of imports reportedly en route to the U.S. will be significant enough to affect steel tags. “I can’t get a good read on the volume of imports,” said one source. “The import prices seem to be keeping pace with increases in the domestic market.” Noted another: “Foreign prices are not as advantageous as you might imagine.”

Foreign offers open and close very quickly. “If you don’t act that day, you are out,” said one exec. “We used to be able to place a foreign order and get it in 12-14 weeks; now it’s 16-20 weeks. Nobody can plan for that,” added another. “We see that going all the way through 2022. I think steel supplies will get worse in this country. And steel is not the only raw material that will be affected”

Based on a flash poll of executives on the call, almost all predict further increases of $2-4/cwt in galvanized prices over the next 30 days. Six months from now, roughly half see prices flat to down, while the other half see them up a further $2-4/cwt. Almost no one on the call believes prices will peak and begin to fall until at least August, if not later.

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