HARDI: War Flips the Script on the Galvanized Market

SMU’s check of the market this week puts the average base price for galvanized steel at $1,700 per ton. That’s up from $1,420 per ton on March 1 – an unprecedented jump of $280 in such a short period.

“If you are feeling a little whiplash, it’s not just you. This is one of the sharpest market changes ever seen,” Cowden said.

Since HARDI’s last call on Feb. 22, just days before Russia’s invasion of Ukraine, the war has flipped the script on the galvanized sector. Galv prices had been trending downward since peaking last September at $2,185 per ton ($109.25/cwt). Even last month the galv price dropped by a further $8/cwt, but then suddenly reversed course and jumped $14/cwt higher as the war disrupted raw material and steel shipments from the CIS region.

“We went from asking, ‘How far will it fall? to ‘How fast will it rise?’” observed one HARDI member.

Since the fighting began, global supplies have tightened and prices have risen for pig iron, iron ore, slabs, coal, scrap and zinc, among other commodities. Fuel costs and freight rates have skyrocketed. Yet the HARDI members remain sanguine. Demand from the construction and HVAC sectors they serve has remained strong so far and the escalating prices are drawing customers back off the sidelines, they reported.

SMU data confirms that steel demand is stable, if not improving. “People are coming back into the market because they have confidence that prices will not be lower next week,” Cowden said.

“Customers who previously were waiting to buy are now taking a position on news of the increases. Now they are worried that what happened last summer [short supplies in the U.S.] might happen again,” said one HARDI member.

“The war is having ripple effects that none of us has ever seen. Everyone wants to hedge and lock in a price today,” said another exec.

“What will the third quarter look like in terms of availability if these trends continue?” asked another distributor on the call. If the chip situation improves and automotive picks up, that could put additional strain on availability. “Automotive could be another wrinkle that pushes lead times up to 10 weeks again. We have to manage it similar to last year.”

One HARDI member in the Northeast said he is seeing less competition from Canada as exporters pull back to service their home market. “Domestic mills may look to export to Europe, which would make the supply situation even worse here. People are starting to double and triple book, not just in coated products but others, to make sure they have adequate supplies,” he said.

Construction projects already under way will continue, but some smaller projects may come to a halt if smaller builders can no longer afford the cost to finance the materials. “Cash-healthy builders will pick up a lot of work and those that are cash-poor may fall by the wayside,” commented another participant.

A real-time survey of HARDI members on the call found that nearly all expect galvanized steel prices to rise even higher in the next 30 days by anywhere from $2-6/cwt. A full 40% predicted galv prices could jump by another $120 per ton in the next month.

With no way to predict the duration or outcome of the conflict in Ukraine, it’s impossible to know how much longer steel prices may rise. But most HARDI members responding to the poll expect galv prices to be anywhere from $120-200 per ton higher six months from now. About one-third, however, believe prices could be flat to down somewhat from where they are now, betting presumably that the war will reach some sort of resolution and the market will be able to adapt.

“Markets leave clues,” commented one distributor. “We are going to manage this one as we did the last one. Solid, loyal customers will get steel first.”

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