Steel Markets

Notes from Metalcon 2013

Written by John Packard

For the past three days, Steel Market Update has been canvassing those attending the Metalcon show in downtown Atlanta. We spoke with manufacturers associated with the metal building, architectural panel and various construction products as well as their service center, steel mill, trading company, paint and toll processors.

We heard mixed results regarding 2013 versus where business rates were at during the prior year. In most cases the results were either up a few percentage points or down a few percentages point. Collectively, the feel was the year has been “ok” – but not as good as expected this time last year.

The main flat rolled products used in metal building, architectural panel and construction products are; hot rolled (purlin), galvanized and Galvalume. The industry uses a tremendous amount of prepainted coated steels.

The group of manufacturers and their suppliers which are associated with Metalcon tend to be involved in the light gauge (thin steels) markets which are areas attractive to foreign imports. We held discussions where selling prices were referenced regarding Asian prepainted steels (India, China, Taiwan, Korea) were in some cases $160 per ton below the domestic market. A domestic mill which also paints steel for their clients is convinced that there will be a surge of cheap galvanized, Galvalume and prepainted steels come first quarter 2014.

During a conversation with a paint company he told SMU that the tonnage of prepainted steel coming into the United States during one month was enough to keep a domestic paint line busy for up to five months.

With the spot price increase announcements being made in conjunction with the opening of Metalcon pricing was a topic for discussion.  Everyone wanted to discuss both spot and contract price negotiations.

One of the smaller domestic mills told us during a one-on-one meeting with SMU, “No one seems desperate, either from the mill side or the buyers’ side. The price increases that the mills want seem to be posturing. They are setting the tone for contract negotiations.”

When we spoke to the larger mills they were adamant that they would collect higher prices and that prices would not drop between now and the end of the year.

Many of the large manufacturing companies wanted to discuss contract negotiations with the domestic mills. A number of the companies pointed to the differences between a small company and a much larger company. “The differentials between larger and smaller buyers need to remain,” is what one corporate buyer told us. That buyer was less concerned about paying a higher price and more interested in making sure their competitive advantage did not disappear during the negotiation process.

We spoke with two buyers earlier this week at Metalcon who told us, “The mills have to decide what they want. They want guaranteed tonnage or they don’t. Some mills will tell you that they want to fill their mill profitably…We need to know what the price increase is based on. Our big box customers will not accept a price increase without justification.” Just prior to concluding our discussion one of the buyers told us, “I don’t believe there won’t be an index deal available [when all is said and done].” At the same time both buyers admitted negotiations could drag into next year and that their purchases of foreign steel would most likely increase because of the dragging negotiations.  “We started negotiations three months ago,” they told us, “we have yet to get a firm price from [mill name removed].”

We also heard from multiple distribution sources that volumes are decent but there continues to be a drag on margins. The market continues to be a very competitive place to operate.

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