Steel Mills

HARDI Wholesalers Waiting for Demand to Catch Up

Written by John Packard

On Wednesday of this week HARDI hosted their monthly steel conference call. Steel Market Update participates in these calls which are dedicated to a better understanding of the galvanized steel market. The participants are wholesalers, service centers and manufacturing companies who either buy or sell galvanized sheet products used in the HVAC industry.

SMU advised that we had just moved our Price Momentum Indicator from Neutral to Lower. One of the steel service centers on the call was asked if they agreed with the SMU change in Momentum.  “I would say I am still in neutral camp, because we live in the [company name removed] world and the coated world.  And the conversations that we are engaged in right now at the mill level, again, there is firm position and support at these numbers [current price levels] and there is not a desperation to fill the order books.”

A number of the wholesalers agreed with the service center and advised that the mills have “nothing to gain” by dropping prices from their current levels. One of the wholesalers on the call said, “I think there is stability at the mill level, and maybe it is just wishful thinking, but I think mentality is kind of the same with all the ones we deal with. And that is, what do we have to gain by dropping the price? We are not going to be dropping the price 50 cents to go chase tons when in the big picture there is not a whole lot of import coming in.  So I agree stability at mill level but I think it is very fragile.”

The group also discussed the psychology of the market and the difference between what is happening on the street with their customers and what is happening at the mills. “[name removed] mentioned psychology, and its part that and peoples buying habits.  Whenever people are assured that the number will be higher tomorrow they are more willing to buy more.”

The wholesaler then talked about their contractors buying less steel and smaller orders when there were questions about pricing direction. “And so you are not [getting] as big a request for quotes as usual, you are not selling as big of orders to the contractors.  And also people holding inventory, when they are not sure of which way pricing is going it seems they become a little more aggressive.  That is what we are seeing, competition is a little more aggressive and we are trying to make heads or tails of what is going on because the mills are holding relatively firm.  I would say relatively firm as they were willing to negotiate somewhat for September when they weren’t for August and July.”

A wholesaler in the Midwest told the group, “We see demand flat to off, we talk about guys purchasing a bit extra when prices are rising, lot of guys see work coming but have been holding off on purchasing because of the psyche, because they think the price is going to drop and are holding off as long as they can on purchase.  And we see other people come into our area and in turn do some price cutting, desperate to get orders now instead of waiting with patience.”

A number of the contractors discussed demand for galvanized in their various regions around the country. In the Southeast we heard demand was “flat to good.” In the Mid-Atlantic demand was reported to be, “really weak.”  From the Midwest one of the wholesalers told the group about demand in their area, “Our demand down in July and comeback to a little more normal demand for August.  It is not good by any stretch of the imagination but it isn’t bad either.”

We heard an interesting comment from a wholesaler in the Rocky Mountains area of the country who told the group, “We are seeing in our markets a lot of customers, just due to general market trends, just going out and purchasing from anyone and everyone earlier this quarter. And we are actually seeing a slight delay in demand, not because they don’t have the work but simply because they have covered their needs for a short period of time. So I think that is going to come back but it is just a delayed reaction right now.”

Then the group heard from one of the Canadian companies on the call who reported, “We are steady in Canada but we have some question marks revolving around end of year, whether demand will remain steady or if it will decrease.  Certainly we don’t expect it to go up by the end of the year.”

A wholesaler in the Northeast pointed out, “Of course we see it in market psychology that we’ve talked about. Everyone’s got inventory and not buying much. [Name removed] mentioned that instead of 5-10 truckloads it’s 1 to 2.  When someone reaches the breaking point and says, ‘Oh I have to buy more stuff’ and then everyone says materials going out, prices can actually rise in a period like this. We’ve seen that happen before, when demand finally catches up and people say I have to build inventory again and the demand through the service center and demand for the mills will actually increase a bit and that can change things. Lot of interesting stuff going on.”

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