Steel Mills

HARDI Wholesalers Report Some Pent-up Demand

Written by Tim Triplett

Wholesalers who sell galvanized steel products to the HVAC sector remain surprisingly upbeat, despite weak steel prices and uncertain demand due to the coronavirus.

In a conference call this morning, members of the Heating, Air Conditioning & Refrigeration Distributors International said they are benefiting from some pent-up demand, especially in the Northeast where state and local authorities were aggressive in calling for virus-related shutdowns. “A lot of people were shut down for two months, so you have two to three months of demand crammed into July,” said one HARDI member.

Another member in the Midwest reported that business in the first half was actually slightly better than in the same period last year. “Hidden inside that statement is the variance between different markets, with the laggard being down 14 percent and our best performing branch up 33 percent. That’s quite a spread.” July sales are tracking up 5-6 percent over the year-to-date average, he said, while inventories are slightly below normal. “We have been in a destocking mode with the declining prices and shorter mill lead times. We expect prices to settle about a dollar or two below last month.”

He and other HARDI members were surprised by U.S. Steel’s announcement Monday raising flat-rolled steel prices by $40 per ton. “I doubt it will have much of an effect on our negotiations with the mills. It is still very competitive on the street level. A mistimed or bad buy can be very costly in this environment.”

“I don’t know that U.S. Steel is selling much into the HVAC industry. I have my doubts that their increase will have much impact,” said a wholesaler in the South. He reported that business in the second quarter was on par with the first, which is positive news, although the second quarter typically is stronger on a seasonal basis. Navigating which jobs are delayed and which customers are uncomfortable having visitors is an ongoing process, but overall demand is good and inventories are low. “We expect continued downward pressure on prices,” he added.

HVAC and construction are two of the strongest market sectors, though orders are smaller than usual as customers continue to buy hand to mouth, reported another exec on the call. There is some tightness in specialty items such as aluminized and Galvalume, with lead times pushing out. Minimills and coaters remain aggressive as they work to fill their August and September order books, he said. “Overall, our volumes have gone up, June over May and July over June, so far. So, we continue to see people get busier. Is it great? No, but it’s improving. We’re cautiously optimistic.”

HARDI members are keeping a close eye on reports of coronavirus surges, which could slow construction activity in various parts of the country. “We’re concerned about more shutdowns where COVID is spiking. A repeat of shutdowns and shelter-in-place is a little nervous-making,” commented an exec whose company does business nationwide. “While our business is strong and even with last year, we are still keeping head count low to make sure that if everything swings back to the dark side, we are ready to respond quickly.”

Galvanized steel prices have declined by $7/cwt since January to the current $32.50/cwt or $650 per ton, according to Steel Market Update data. HARDI’s poll of members on the call showed that 65 percent expect flat steel prices over the next 30 days. Looking six months ahead, the majority see prices flat to up slightly.

Steel Market Update participates in a monthly steel conference call hosted by HARDI. The call is dedicated to a better understanding of the galvanized steel market. The participants are HARDI member companies are wholesalers who supply products to the construction markets, also on the call are service centers and manufacturing companies that either buy or sell galvanized sheet and coil products used in the HVAC industry and are suppliers into the HARDI member companies.

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