HARDI Wholesalers Say Discipline is Key to Market Stability

This wholesaler then concluded his remarks with, “But in terms of general business it is good, but not as good as it was a few weeks ago but I am optimistic things will pick up here pretty soon.”

One of the steel service centers on the call told the group that stability at the domestic mills is not a bad thing as it “…makes everything a little bit easier for everybody.” He went on to say, “I think the market has room to go up, because if you see your replacement cost, we are not quite there yet…  If I had to forecast I would say prices would stay flat or maybe dip a little bit in October.”

A second service center also reported more discipline from the domestic mills and they reported galvanized base prices as remaining at, or close to, their 52 week highs. They reported sheet inventories out of the MSCI distributors as having dropped and when queried specifically about coated steel inventories they told the group that they had dropped from 1.67 months at the end of May to 1.471 months as of the end of June. They told the group that the 1.471 month’s supply is the lowest they have seen since they began tracking this data in January 2011.

A number of the wholesalers reported large mechanical contractors as having bought heavily earlier this year in order to cover summer needs at lower costs. SMU asked when those buyers would need to come back into the spot market to cover 3rd Quarter needs and we were told August and September. “Demand will be up again in August and September… Demand isn’t terrible but a lot of our bigger customers bought significant amounts. We had record sales in April and May and it was because of that. They were buying out [to cover summer needs]. We are not sitting on our hands but demand isn’t as robust as it typically would be if it wasn’t for this price movement.”

We heard from HARDI member companies in Colorado, Kansas and in Canada all suggesting that business conditions are good, especially for commercial construction which is a major user of flat rolled.

When asked about foreign steel one buyer who traditionally has been a foreign buyer told the group, “We are finding domestic mills competitive with Indians, at this point [they are] in fact more than competitive. We have had no problem getting material from SDI or California Steel.”

The wholesalers as a group appear to be only buying what needs they have and no one is building inventories. “No one wants to get burned like 2008,” is what one Midwest based wholesaler said.

HARDI = Heating, Air-conditioning, Refrigeration Distributors International. The group conducts a monthly galvanized steel conference call which Steel Market Update has participated in going back to our publisher (John Packard) steel sales days prior to 2008.