HARDI Members: ‘More Inventory Invites More Competition’

“I think demand has rightsized a bit. There’s less urgency among buyers as inventories get healthier. More inventory invites more competition and has an effect on steel prices,” observed one wholesaler in the Southeast. “Underlying demand is still pretty strong, but sales are starting to soften a little bit. Street pricing is starting to deteriorate due to the fact there’s more inventory out there. More competitors have steel and are providing quotes to customers. With the price run-up slowing, customers have less incentive to make big buys,” added another HARDI member.

Steel Market Update reported the average galvanized steel price at $2,115 per ton ($105.75/cwt) this week, up a slight $5 per ton from last week but down $70 from its high point about a month ago. “Normally, $70 would be a big drop, but with prices so high it seems fairly modest. But galvanized prices are bouncing around the peak and may well be past it at this point,” said SMU Senior Editor Michael Cowden in his remarks to the HARDI members.

SMU moved its Price Momentum Indicator on hot rolled steel to lower last week, following a series of small price declines. But the momentum on cold rolled and coated products is less clear. “Hot rolled prices tend to change more quickly, while cold rolled and galvanized are stickier,” Cowden said. Look for the momentum indicator on galvanized to follow hot rolled lower in the coming weeks, if prices keep trending as expected, he added.

While the HARDI members have adequate inventories of most products, and are no longer scrambling for supplies, they remain on the lookout for certain high-demand items. “Our inventory is not too low nor too high, but we have spot shortages. We are in great shape on some items in some locations, and tight on some items in other locations,” said one exec. “We want to work out how to buy a minimum amount of steel and still take care of our customers. The domestic mills may not favor production of as much light gauge. So we are trying to keep an eye on offers of light gauge to make sure we don’t run out of those items in Q1/Q2,” said another. “Steel mills are tight on deliveries and meeting delivery dates. We would typically be ordering out 1-2 months, but are now 3-4 months out on orders to make sure we get in their rolling schedules,” added a third.

Some of the companies on the call are looking for help from imports, but they acknowledge the risks. “We are still seeing foreign offers, but the lead times are worrisome. They are offering attractive base prices on 3,000-5,000 tons for delivery in a March/April timeframe. But it’s hard to pull the trigger on that many tons that far out. And delays could push it out even further,” noted one wholesaler.

In a flash survey of the HARDI members on the call, none expected galvanized prices to rise over the next 30 days. About one-third said they expect prices to remain flat, while the other two-thirds anticipate declines of $1-3/cwt. Looking further out, virtually all the executives on the call see galvanized prices lower by $2-6/cwt or more six months from now. About half expect prices to fall yet this year, the other half in the first quarter next year.

Steel prices are notoriously unpredictable, though. Prices might defy forecasts should supplies remain tight on mill consolidation, inflation, and supply chain issues – notably port congestion and labor shortages. “Since everyone agrees that prices are going to fall, they’ll probably rise,” joked one exec.

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