HARDI: Change Is in the Air for Galvanized

Like other steel products, the price of galvanized steel has risen continuously for the past year to record highs. Steel Market Update reported the average base price for galvanize steel at $2,150 per ton ($107.50/cwt) last week, double where it was at the beginning of the year and up 2.6% from mid-August. “The million dollar question: At what point will prices reverse course?” asked one member of the trade group, which represents wholesalers who supply products to the construction markets.

Speaking during the call, SMU Senior Editor Michael Cowden noted that lead times for spot orders of galvanized steel have declined by nearly two weeks this summer. At an average of 11.22 weeks, lead times are still highly extended but trending downward. Which is the same for all steel products in the current environment. “So it is a synchronized decline, which I think is meaningful,” he said, as a leading indicator of price direction.

Loosening of previously tight supplies is another notable sign of a shifting market, Cowden said. About 58% of the buyers responding to SMU’s questionnaire last week see more availability from the domestic mills, up from 37% in mid-August. “You don’t have to scramble so much to get steel anymore,” he noted.

Demand in the commercial construction sector remains robust, according to the HARDI members. “For the first time in a long time, it’s not the same old story [in terms of prices],” said one wholesaler. “But at the street level, the contractor level, it’s the same. We’ve seen no significant demand erosion from the high steel prices.”

Based on the strong demand they see, most HARDI members believe galvanized prices still have some room to run. Likewise, manufacturers of construction products on the call said they expect demand to remain strong through the fourth quarter. “From a pricing standpoint, the mills are asking for more for November than October,” said one exec. “The pricing from the mills is still looking up.”

How much the wholesalers can charge their customers is in play, however. “In some markets closer to major ports, which are more influenced by imports, the street number has fallen,” said another. “There is more supply in those market and it appears they have an advantage on us in terms of margin. The foreign influence is allowing some of our competitors to get steel at a good prices, and it is a significant advantage.”

In a flash survey of the HARDI members on the call, about one-third expected galvanized prices to be flat over the next 30 days, with the remainder split over whether galvanized will move up or down in the short term. Asked where galvanized prices will be six months from now, the consensus was clear: Nearly nine out of 10 expect prices to be flat at best to down as much as $6/cwt or $120 per ton. Roughly half expect galvanized prices to fall by the end of this year, the rest in the first quarter next year.

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