HARDI Members Not Concerned About Big Price Declines...Yet

Steel Market Update’s check of the market last week put the average price for galvanized steel at  $2,110 per ton, a small decline of about $75 per ton from its recent peak. That’s in line with recent declines in lead times for galvanized orders from domestic mills, which are now around 10 weeks rather than the highly extended 13 weeks earlier this summer.

Steel supplies have loosened considerably, and buyers like the HARDI members no longer feel the same urgency to place orders just to make sure they have enough steel to meet their customers’ needs. SMU data shows that steel inventories have been creeping upward since April and are now even higher than they were in the “normal” year of 2019, SMU Senior Editor Michael Cowden said on the call.

Inventories that are balanced and perhaps even trending a bit high would normally be a bearish signal for steel prices. But prices have only responded a small degree so far – and the reasons why are unclear, Cowden said. “Perhaps the mills are trying to hold the flag high. Perhaps it’s too hard to get the steel off the boats and to your door.” Comparing steel prices during past swings in the economy to the COVID calamity of the past year, he added, “we need to be sure not to use the same pricing models we used before the pandemic.”

He added: “Prices have peaked. Will they come down to previous levels? I don’t know the answer to that. The music certainly hasn’t stopped.”

One HARDI member pointed to some seasonal slowing in the fourth quarter, worsened by jobs delayed due to material shortages. “But we are still predicting a really good 2022. Customers don’t expect a slowdown,” he said.

“We are taking a break from the buy side. We don’t have to double order because we are no longer afraid we won’t be able to get inventory,” he added.

The holdup in import arrivals due to bottlenecks at the ports is keeping the supply side tighter than expected and propping up prices, noted another exec on the call. He reported some buyers holding off on orders. “Customers are hesitant now, believing prices will come down.”

Volumes remain solid, but not as high as 3-6 months ago, reported a service center exec on the call. “Some customers are thinning out their HVAC inventories. They figure they don’t need it on the shelf because they can now get it pretty quickly,” he said.

And competition is heating up. “Now that there’s a lot more inventory available, people are getting more aggressive with the inventory they have,” noted one distributor.

In a flash survey of HARDI members on the call, nearly half (45%) said they expect galvanized prices to decline by more than $2/cwt ($40 per ton) in the next 30 days. Virtually all expect prices to move somewhat lower, or at best remain flat, over the next month.

Asked where galvanized prices will be in six months, nearly all see galv prices down at least $2/cwt ($40 per ton) and possibly more than $6/cwt ($120 per ton) by mid-2022.

While about one-quarter anticipate the price fall yet this year, the other three-quarters believe the correction will hold off until sometime in the first quarter.

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