Once a month HARDI wholesalers conduct a conference call for those member companies who are involved in the sale of galvanized sheet and coils to the mechanical contractors involved in residential and commercial construction. Steel Market Update publisher, John Packard, has been involved with the HARDI organization for many years going back to his steel sales days at Winner Steel (now NLMK Sharon).
SMU pointed out at the beginning of the call that there have not been any new price increase announcements over the past 30 days. Flat rolled base prices are up with most mills that supply the wholesalers collecting base price numbers in the $28.00/cwt-$29.00/cwt range. Some of the mills who do not supply HVAC products are reported to be offering to sell galvanized at base prices over $30.00/cwt.
We spoke about lead times which can be a little deceiving for the HARDI wholesalers. As one wholesaler put it, “We deal with a mill with short lead time and it can either be an anomaly or be something that we have to put in our overall evaluation and say if it is or isn’t an anomaly. There is no point talking about US Steel or AK Steel on this discussion ever, because they don’t participate [in the wholesaler markets], they never do. What they do doesn’t matter to what happens to most of our costs.”
The main theme of today’s call was the belief by the wholesalers that the demand fundamentals are not there that would take the galvanized steel prices much higher. “I have concerns about where we go from here,” one wholesaler told those on the call, “fundamentals aren’t there to take this any higher. I don’t think we are going to the levels we saw at the beginning of 2015.”
Other wholesalers agreed with the comments made above. One Midwest based wholesaler told the group, “There is no doubt the price is up probably four bucks or four cents a pound… But, from my vantage point there needs to be something to happen that will allow this [higher prices] to continue. Otherwise, your suggestion yesterday, John [referring to SMU article] about a range bound market could take place.”
The wholesalers who spoke this morning reported galvanized spot base prices as having risen at least $4.00/cwt ($80 per ton) since late December. However, at the same time they reported that service centers who compete with the wholesalers have not taken the numbers up anywhere near the amount of the increases. One of the wholesalers reported, “…once again the non-traditional guys, O’Neal, Kloeckner they aren’t up one iota and that gets discouraging.”
Two service centers who were on the call (both HARDI members) told the group that they were seeing an improving situation in the service center to service center spot sales. One of the distributors told the wholesalers that they were seeing an improving inventory situation (at service centers) and imports, which were close to 4 million tons one year ago, are down dramatically year-over-year. From their vantage point there could be an issue of too little inventory being available as some buyers continue to sit on their hands and not buy into the higher prices. “Just be prepared and watch lead times,” said one service center on the call. He continued with, “The only thing worse than having a high number [price] on steel is not having any steel at all.”
SMU asked the wholesalers for some feedback as to how they were seeing demand from their customers (who are the mechanical contractors producing ductwork and other products for the residential, non-res and commercial construction markets). All of the wholesalers, except those located in the Northeast/mid-Atlantic area of the country, anticipate increases of 5 to 10 percent once 2016 is complete.
The Canadian companies were much less optimistic reporting their business as being flat with no growth expected between 2016 versus 2015. The value of the Canadian dollar is now around $.72 versus the US dollar and that is weighing heavily on the Canadian manufacturing companies.
HARDI = Heating, Air-conditioning, Refrigeration Distributors International
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