HARDI Wholesalers Report They are Paying More for Galvanized

The two service centers on the call reported spot demand as being steady but there has not been a run on galvanized products.

One large galvanized distributor told the group, “If you look at the market now, in the past we would see suits filed and mills would have a knee jerk reaction and we would see something like a $50 to $60 per ton price increase. But, it seems they are thinking in the long term and are not just trying to take advantage of the situation. It doesn’t appear there is much downside [price risk]. I think we are hard pressed to find support for why mills would lower pricing from here.”

When asked if the service centers were seeing any increases in spot business the group was told, “Very little, again normally with the mill increases being larger and if the lead times were pushed out more, we would have a much stronger run of people trying to hedge. At this point I think there still remains a lot of uncertainty about trade cases to be filed. I still think people are trying to correct inventory levels at this time.”

One of the galvanized service centers reported galvanized inventory levels as being 1.9 months supply based on the most recent MSCI data which was just released this past week.

The net result to the wholesalers is they are paying higher prices. One of the Midwest based wholesalers told the group, “Prices are definitely up. We’ve been to the mill twice with two different buys since the initial increase was announced. We have stair stepped up, not to the magnitude of the increase, but we have stepped up each time in various amounts.” He went on to talk about what he was hearing from his steel mill suppliers, “I want to joke and say nothing. They are late on orders right now so they are difficult to get a hold of right now.”

A Southeast based wholesaler told the group, “The mills are in a better mood than they have been in awhile. They think there is a lot of good news for them and there is a lot of momentum for them and they feel like they have support for price increases. But, I am still worried about the lack of fundamentals. It seems like most of the momentum is trade cases and labor negotiations at some of the mills and one of the automakers. But it worries me that if one of those or neither of those happens to the magnitude the mills need it to be, then the fundamentals [to support pricing] aren’t really there in my opinion.” He continued, “We had a very good month but there still seems to be some hesitancy on the mills part to really run out and try to raise prices. We are paying higher prices but there is just a bit of paranoia on the mills part as to whether or not it is going to last.”

A number of the wholesalers reported business demands for their products as being “good” to between “reasonable to good.” These representations from a group that was a little less enthusiastic just a month ago.

Overall, the wholesalers (most) seemed to be in good spirits, paying a little more for their galvanized than the prior month, thus increasing the value of their inventories, and a little less concerned about the competition (as the subject was not brought up during the conference call).

SMU Note: HARDI = Heating, Air-conditioning, Refrigeration Distributors International