2018 Q3 Supply Market Recap

Harleysville, PA, August 13, 2018 – Q3 continues to offer price and lead time uncertainty on steel commodities largely related to Section 232.  Globally, President Trump remains firm in his trade reform platforms with NAFTA, European Union and China.  China specifically is center stage for aggressive US action against unfair trade practices.

Section 301 of the Trade Act of 1974 targets China’s acts, policies and practices related to technology transfer, intellectual property and innovation.  To date, $50B of China exports into the US have been imposed with a 25% tariff with another ~$200B of proposed tariffs under evaluation.   The US trade deficit with China sits near $347B.

Currently, US steelmakers have been able to preserve inflated steel prices.  Raw domestic steel producers have upwards of 40% “extra” profit margin built into the market price.

Section 301 tariffs will be the largest variable for the remainder of 2018 in President Trump’s global trade reform policy.   While the US has strong GDP growth, low unemployment and high consumer confidence, inflation due to import tariffs and higher steel prices could have an impact.   This coupled with slow wage growth, higher interest rates and market corrections, could cause unforeseen price and lead time issues in not only the commodities listed below, but many other ancillary items that affect our business.

Category price and lead time update:

  • Domestic A53B GrB, A53F GrA & A135/A795 Pipe – Price to remain flat entering 2018 Q4. Lead times are very low.   Most pipe mills have ample stock on the ground.
  • Import A53B GrB – Master distributors are running low on inventories. Market pricing on import A53B has remained elevated for 2018 due to replacement costs and uncertainty around Section 232 trade action.
  • Copper Tubing – Relative flat pricing tied to Comex.
  • Domestic Weld Fittings & Flanges – After Weldbend’s 7.3% increase on fittings and flanges in Q2, Weldbend imposed an additional 4.5% increase on flanges in June. Domestic weld and flange pricing should remain flat through 2018.   Lead times continue at three weeks for commodity material.
  • Import Weld Fitting & Flanges – In 08/2017, Tube Forgings of America and Hackney Ladish filed a request for investigation citing that certain Malaysian weld fitting manufacturers were using Chinese weld fittings and stamping them “Malaysian”. In July 2018, the International Trade Administration hit several large Malaysian weld fitting manufacturers with a 182% tariff.   This greatly impacts US master distribution supply chains.   We remain to see price and lead time impact pending alternate sourcing efforts from weld fitting importers.
  • Copper Sweat / Press – The COMEX remains volatile with labor disputes in Chilean mining however we expect to see copper remain relatively flat for the balance of 2018. Global demand remains soft (mostly due to relaxed China infrastructure growth) and inventories are in surplus.
  • Iron Fittings – Market has increased ~16% in 2018 due to rising scrap prices. Price should remain flat through 2018.  Lead times are very low.
  • Hangers, Strut & Threaded Rod – We have seen a ~24% increase in 2018. Price should remain flat.   Lead times low.
  • Bronze & Iron Valves – We do not expect any price or lead time volatility through Q4.
  • Victaulic Grooved Product – Victaulic passed an additional 6.5% increase in July 2018. Historically, Victaulic has one price increase every year but they had two in 2018 due to steel pricing for their foundries in US and China.
  • Stainless Steel Pipe, Fittings & Flanges – We expect stainless pipe to decrease ~5% due to nickel’s regression. Stainless flanges went up 22.5% in early August and we expect similar volatility with stainless fittings though the end of 2018.
  • Forged Steel Fittings & Seamless Nipples – Forged steel fittings has seen ~25% increase in 2018 due to ITC trade case imposing tariffs (China Both-Well – 142%, India Both-Well – 116%, Italy MEGA – 80.2%) on rough forgings entering the US. Phoenix (Capitol) and Bonney Forge are 100% US made and manufactured however inventories continue to be disrupted due to less imports.
  • Forged Steel & Cast Steel Valves – We have seen a 50% increase in lead time as valve bodies become scarce globally due to trade reform. We anticipate lead times to push out even further as 2018 continues.