Steel Mills

Galvanized Wholesalers Find Current Demand/Pricing Discouraging

Written by Sandy Williams

The HARDI wholesalers held their monthly galvanized steel conference call earlier today. During the call the wholesalers provided insights into business conditions affecting the companies and discussed the status of the flat rolled steel markets. HARDI wholesalers supply galvanized sheet and coil steels to the mechanical contractors associated with residential and commercial construction in North America.

Demand was the main topic of discussion in today’s call. Most callers found demand to be weak or “discouraging” in their regions.

In the South demand was described as “really poor” by one of the larger wholesalers located in the region. “It’s been noticeable and I’m sure some of it has to do with changing season, but it has been alarmingly and noticeably slow.” Callers from the North and West concurred.

In the Midwest demand was “flat, or up slightly.” The wholesaler noted that depending if you are measuring demand in terms of dollars business will be down because of the selling price of steel. On a pounds sold basis, the caller said, “we have actually sold more steel.”

Canadian and West Coast callers said demand has been steady but weakening.

According to the wholesalers on the call, business from contractors has slowed down noticeably over the past month creating more competition for the business available.

One caller noted that the base price of steel dropped four dollars ($80 per ton) in four months, “If you are talking about two months of inventory at the service center level, that is a boatload of money.”

Steel pricing was a topic of concern with many wondering if prices have hit bottom. No one was really sure when that may occur and it was suggested a further decline may be coming due to weakness in the scrap and iron ore markets.

There was concern about what sustained low prices would mean for steel mills and whether they can survive the pricing and demand pressures. US mills are currently at 67 percent capacity and are cutting costs as needed to survive. SMU’s publisher, John Packard, said the more pressing issue is a possible lockout of workers at US Steel or ArcelorMittal as the impasse over health benefits continues to stall negotiations. A second issue is that galvanized import numbers have dropped dramatically. A third issue needing to be watched is the potential shut down of domestic steelmaking capacity at US Steel Granite City Works and AK Steel Ashland steel mill. With US production pushing less steel into the market and a cutback in imports, at some point inventory buying will need to pick up.

Most callers said they have not stopped buying and that they have been consistent buyers on a month to month basis, but inventory increases were not likely to occur soon.

A Midwest service center commented that the industry is in a holding pattern, with most service centers having inventory on the floor or inbound that they wish they hadn’t committed to.

“It is important to consider there has been an over correction with drop of prices recently,” he said. “But also in markets like this when we overcorrect on the way down, on the bounce up it is an overcorrection too, and a pretty rapid one too when the market changes.”

“As the market corrects order books will pick up and along with them, pricing,” he added.

Market projections were not optimistic for the end of the year but improvement is anticipated going into first and/or second quarter. We heard that most of the wholesalers believe that commercial activity will pick up following normal 4th Quarter and into 1st Quarter seasonality issues. The expectation is for 2016 to be a better year for the construction markets served by the HARDI wholesalers.

HARDI = Heating, Air-conditioning, Refrigeration Distributors International

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