Steel Mills

HARDI Wholesalers Report Good Demand

Written by John Packard

On Wednesday, Steel Market Update (SMU) participated in a monthly steel conference call hosted by the Heating, Air-conditioning , Refrigeration Distributors International (HARDI). HARDI wholesalers supply galvanized sheet and coils to the mechanical contractors involved in residential, multi-family and commercial construction segments of the construction industry.

Consolidation was the first topic of discussion with AK Steel and Steel Dynamics’ recent absorption of the former Severstal North America facilities. One of the service centers involved with the group pointed out that a number of the low priced domestic options have been removed over the past two years. RG Steel was dissolved through bankruptcy and the plants no longer exist, ThyssenKrupp Steel in Calvert, Alabama was purchased by ArcelorMittal and Nippon Sumitomo (AM/NS Calvert) which has resulted in a more structured sales process. Also, Nucor is in the process of purchasing Gallatin which the service center described as, “elimination of the lowest common denominator.” In other words, one of the lower priced domestic mills is being bought by a mill which will probably monitor prices better than what is happening at the mill currently.

Secondly, HARDI wholesalers are dealing with higher galvanized coating extras which are resulting in higher galvanized costs for material arriving in October. To date, the HARDI members have not seen base price adjustments to off-set the higher coating costs. The unanswered question is will the wholesalers be able to collect the higher prices in their market?

There was a core discussion about the direction of steel prices as most of the wholesalers on the call found the market to be “quiet” at the mill level. One of the wholesalers told the group, “I am concerned about the direction of steel pricing. It has been quiet at the mills right now which has created some uncertainty. We are seeing spot prices on the street level as having dropped.” The street level spot pricing comment was associated with a competitive issue with service centers lowering spot prices as a way of moving inventory in expectation that domestic mill prices will begin to move lower.

The wholesalers are seeing, “Mill discipline seems to be trumping things right now.”  One of the participants told the group, “The expectation is for the market to drop and we just don’t see it at the mill level.”

A large galvanized service center which services many of the HARDI wholesalers told the group that their business has been quite strong. “We had a very busy July, August and so far in September. Spot is hot right now.”

A wholesaler in the Southeast was particularly concerned about the amount of foreign steel flooding into their market. They reported good demand for their products but, “…we have concerns as to where steel [pricing’] is going and specifically compared to the import numbers which we compete with pretty regularly and continue to be a thorn in our side.”

A number of companies on the call were questioning where the holes in the inventories are coming from. “Inventory levels seem to be rising, imports are coming in and lead times are compressing.” They went on to say that the information is “conflicting” with what is happening with steel prices right now.

This Southeast wholesaler told the group, “Without some major disruption like a mill outage, I just don’t see base prices going anywhere but down.”

The vast majority of wholesalers reported demand for their products as being good or at least decent. One East Coast wholesaler reported inventory levels as rising and questioned whether the lack of trucks at the ports was creating spot opportunities at the service center level for galvanized products.

The wholesalers are waiting, like the rest of the steel industry, to see if the domestic mills will file dumping suits on galvanized as this could impact their markets over time. It was noted, however, that most of the foreign steel is flowing into the Gulf, Southeast and East Coast and isn’t a large factor in the Midwest and Plains states.

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