Galv buyers notched strong Q1, but see uncertainty on the horizon

“Obviously, they’ve come off a little bit from February and March, where we saw more panic buying,” he said. “But I would say, generally, we’re seeing what we typically see there.”

Each month, SMU joins the council’s meeting to discuss the galvanized sheet market. Participants — members of Heating, Air-Conditioning & Refrigeration Distributors International (HARDI) — are wholesalers, service centers, distributors, and manufacturers who buy or sell galvanized steel.

One buyer said his firm is interested to see what happens in May as it enters its busy season.

“To what degree is it going to be offset by the pre-buys that happened in Q1,” he said. “So, May will be telling, when we get there, if prices stay kind of subdued, or continue in the downward direction.”

Several participants said there are slow pockets of activity in different markets.

One buyer noted, “There definitely are pockets out there where there’s good activity and pockets where it’s definitely slow.”

Another pointed out the absence of mega-projects, like battery plants, can soften those markets.

Hot-rolled vs. galvanized

The buyer also raised questions about a disconnect he sees between the galvanized and hot-rolled futures market.

“I scratch my head at where they’re pegging the May number to be,” he said.

“You’ve got Nucor CSP at $930, Cliffs saying $975, and I think the futures market is calling for $850-$860 in May on hot-rolled,” he added. “That, to me, is just a dramatic decrease in a short period of time. I don’t see it getting that low that quickly, unless the analysts are pricing in some removal of tariffs that I’m that I’m not aware of.”

Another buyer responded, saying in the Eastern US, there are compelling offers for hot-rolled import but “there are no real compelling galvanized offers coming in.”

“One thing I would say that we’re a little bit surprised in seeing is that there really should be a premium on 60-inch product because, of the mills that were named, two of them specifically that can make 60-inch, HVAC grade material – they cannot participate in the market anymore,” he said.

“So, I think hot-rolled is a little decoupled from galv at this point, because there are really not any compelling offers coming into the Eastern US that are really going to force the mills to have them adjust,” the buyer continued.

Higher May

“Our highest-priced inventory is coming,” said another buyer. “We’re in that market again, the part of the cycle where everyone’s got to be kind of careful, because May is definitely going to be higher than April.”

“We were seeing that panic buying in February, March. Obviously, there was a kind of a low there for some folks,” he said. “Then, we’ve definitely seen the last four or five days people reordering again, restocking those shelves again. Whether that’s at the same volumes or not, it’s still reordering.

Playing chicken

Going forward, another buyer said, “The biggest thing we’re looking for is how much demand destruction is there going to be in the back half of the year.”

“You’re kind of playing chicken with the tariffs to see if people start to really pull back and slow their investment and delay those jobs,” or perhaps you end up with low inventories and some surprise demand in the back half of the year.

“I’m optimistic, so I’m going to go with the second answer,” he said.

Looking ahead

In an informal poll on the direction of prices, a solid majority, 57%, expect prices for galvanized stay essentially flat over the next 30 days, while 22% expect a drop of more than $2 per cwt.

Over the next six months, the results were more mixed. About 32% expect prices to stay essentially flat; another 32% expect a drop of more than $2/cwt; and about 23% expect a decline of more than $6/cwt.

As for galv pricing within 12 months from now, about 76% predict prices will range between $50-$59.

_{SMU participates in a monthly steel conference call hosted by HARDI and dedicated to better understanding 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 HARDI member companies.}