Steel Market Update publisher, John Packard, participated in the monthly galvanized steel conference call held by HARDI for their wholesalers and other HARDI member companies. The wholesalers supply galvanized steel sheet and coil to the mechanical contractors who are involved in the residential and commercial HVAC markets.
The group discussed a number of key market issues which could impact their industry. These included the filing of the three trade cases, contract negotiations between US Steel and ArcelorMittal, the announced closure of the steelmaking at USS Fairfield and the over-inventory situation at the flat rolled steel service centers in the United States.
One of the large galvanized service centers that was on the call pointed out many buyers were buying both foreign and domestic steel during the low point in the market back in May and June of this year. That steel is now arriving at the docks or is inbound from the steel mills. He told the group, “There is some balance being restored to the market. Companies are not buying as much import.” He pointed out that the re-rollers may have short lead times but US Steel and ArcelorMittal galvanized lead times are “inquire” in that they have to make sure their contract customers are supported should there be any form of production slowdown or stoppage at any of their mills (USW contract expires at midnight, September 1st). He went on to say that November, December and January inventories will be a product of what people are buying today. The impression has been that there is very little buying occurring right now as companies sit back and evaluate where they are and what will happen next.
The wholesalers reported spot galvanized prices as softening with most reporting mill base prices as being down $20 per ton since our last call a month ago.
One of the Midwest based wholesalers told the group, “Prices are softening both at mill level and SC level. Demand is still reasonable. In the near term– we made some larger buys earlier on but more recently have decided to tighten up our inventory position.”
Out of the Southeast we heard that USS Fairfield closing the steelmaking and rolling operations would not impact their business or source of supply. An executive with a Southeast wholesaler told the group that they would continue to receive material from USS Fairfield the same as they have been over the past few months.
When talking about steel prices this SE wholesaler reported that he believed, “Prices could soften for the remainder of the year.” He told the group, “…business is good, but prices softening. Last time we talked there were increases and the consensus was that prices would continue to rise. Still don’t think the fundamentals are there. Unlike any time I can remember–where demand is good but there is literally no momentum for pricing increases. There is a feeling prices could soften through the remainder of the year. If you look at: lead times, lot of foreign still going on, Cap utilization at 72 percent down from 78 percent same time last year, Scrap was 400 year ago, oil is half what a year ago–lot of things working against any mill looking to get a price increase. Business has had some really good months. Think it will likely slow down as we come into the fall but no signs of economy significantly faltering anytime soon. The Southeast, where we are, commercial construction is really good, really strong, commercial real estate really strong. Atlanta is at a point where industry builders can justify building new warehouses now. That was not the case for number of years. I’m bullish on business but not so optimistic mills will get prices up unless something happens.”
Even wholesalers in the Rocky Mountain States reported prices as mills talked about getting price increases but the talk never gained momentum. However, they did see one of the West Coast mills open their order book for October and “as quickly as the opened the book they closed it.” He reported the tightness in galvanized on the West Coast being due to the trade suits on coated products.
Wholesalers in the Northeast and Mid-Atlantic states reported slow conditions and eroding prices.
This led to a discussion of making sure the wholesaler do their due diligence and make sure that they are comparing apples to apples and not a G60 product being passed off as G90. This is an issue which has plagued the sheet metal industry for many years and the wholesalers struggle to deal with it when they are in a competitive situation and the prices don’t make sense. Steel Market Update has written about this subject as well as the issue of billing methods and these articles can be found in our Steel Buyers Basics series of articles on our website.
Also, our Steel 101 workshop addresses a number of these issues as well as the steel making process and market fundamentals. Go to our website: www.SteelMarketUpdate.com to find out more information about our Steel 101 program and to register for our next workshop which is being held in Davenport, Iowa.
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