Final Thoughts

Final Thoughts

Written by Michael Cowden

We often talk a lot about hot-rolled coil prices in Final Thoughts. I’d like to take a deeper dive into coated prices today.

It’s been an almost straight line up for an entire year for flat-rolled steel prices. And galvanized is no exception. Galvanized base prices are at $2,070 per ton ($103.50 per cwt). That’s nearly double $1,085 per ton at the beginning of the year and more than triple a 2020 low – recorded last summer – of $640 per ton. But it’s down $25 per ton from last week – and “down” is not something we’re used to saying anymore.

gearsBut maybe it shouldn’t come as a surprise. The rate of increases has slowed in August. We’ve been up $10 per ton week-over-week lately instead of the $30-50 per ton weekly gains we were seeing earlier this summer. And we even saw a decline at the beginning of the month, albeit it a modest $5 per ton.

Lead times is where it gets more interesting. Galvanized lead times have come down somewhat of late. From over 13 weeks to about 12.5 weeks. I wouldn’t suggest reading too much into one product. But lead times for Galvalume, cold rolled coil, hot rolled coil and plate have also slipped. That’s what our last survey showed, and I think that is meaningful. I’m not going to predict where prices will go. I think it’s fair to say we’ve hit the pause button and that we “might” be at an inflection point. Heck, I called an inflection point in Final Thoughts earlier this month.

The reason for my caution now: In a word, Ida. We saw a prequel back in February – ancient history, I know – when it looked like prices might have been nearing a tipping point. But then Snowmageddon hit, and prices and lead times shot back up again. We could see something similar with Ida. I don’t know the extent of the impact on steel at this point. But I do know that Nucor’s DRI plant is down, that there are widespread power outages, and that it’s hard to get stuff from Point A to Point B. (Trucks are bad, barges are worse.) Also, there are concerns about shortages of industrial gasses and natural gas. These are some of the same factors we saw after Snowmageddon led to power cuts and widespread mill outages in the South and northern Mexico in February.

Also, let’s nip any comparisons to 2008-09 in the bud. Demand is still good. That was clear from the Heating, Air-Conditioning & Refrigeration Distributors International (HARDI) call earlier today. Especially for galvanized products. It’s not even really fair to say that lead times are shorter. They are less than outrageously extended. And the demand is real in construction – whether that’s ductwork for warehouses (think Amazon) or in more niche markets – think life sciences, medicine and education in the Northeast. (Partly in response to the continuing COVID pandemic.)

People on the HARDI call generally said they were avoiding buying imports, despite potentially big savings, because of concerns about port congestion and other logistical snarls not only in the U.S. but also in countries of origin. Sure, some of that steel might in theory be slated to hit domestic ports this year, but will it really?

But calling around elsewhere in the market, it’s clear that not everyone – especially those near major ports – share those concerns to the same extent. That’s in the data too.

Import license data for August from the Commerce Department is not complete yet. But as of Aug. 30, the U.S. was licensed to import 255,117 metric tonnes of galvanized sheet and strip – the highest volume in at least the last two years and nearly 37% above a monthly average of 186,453 tonnes over that same period.

Sure, much of that is the usual cross-border trade among the U.S., Canada and Mexico. But we are starting to see some decent tons from further afield – like Brazil (28,222 tonnes) and Vietnam (25,919 tonnes). And the trend is true across “other” metallic coated products, a category that includes Galvalume, where the U.S. has since March seen substantially higher imports from Vietnam and Taiwan.

Demand is the sauce that keeps everyone satisfied. And we sure hope there is lots more of it. That said, it will be interesting to see in the months ahead how things play out between more-expensive, shorter-lead-time domestic material and substantially less-expensive, longer-lead-time foreign product.

By Michael Cowden,

Michael Cowden

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