2018 Q2 Supply Market Outlook

In the aftermath of President Trump signing the Section 232 proclamation on March 18th, there remains a high level of volatility in the global steel market.  The largest importers of steel into the US (Canada, Brazil, South Korea and Mexico) continue to negotiate fair trade agreements with Trump’s administration.  While South Korea has been exempted with a quota, we believe Canada and Mexico will gain permanent exemption within the next 45 days.  China continues to take a strong negotiating position with Trump’s administration, however with China’s steel overcapacity problem, we anticipate a fair trade deal to be struck sometime in 2018.

Due to anticipated tariffs, foreign pipe mills have no-quoted import ERW, OCTG and line pipe to domestic importers since early 2018.  We anticipate import tubular products to once again start hitting our shores in late July.  While the raw material costs of steel production have been relatively stable, we have seen a 49% increase in hot rolled coil prices.  It appears that the steep spike of steel coil pricing has leveled out however, some steelmakers speculate another 5% increase in steel coil pricing in the next 45 days.

Copper has reached a market balance surplus for the first time since 2011.  While China demand for the red metal remains resilient, we continue to see 4-6% YoY decreases in demand.   Mining outputs for 2018 remain speculative however Codelco and Freeport, the two largest copper mining companies, forecast equal to slightly greater YoY copper output for this year.

Pricing and Lead time remains a concern for several categories in our business.

  • Domestic A53B GrB, A53F GrA & A135/A795 Pipe – We do not anticipate longer lead times with domestic steel utilization at only ~77%. Current lead times are 4 -7 weeks.
  • Import A53B GrB – Without replenishment on the water, import A53B will continue to remain scarce into late July 2018. This will cause pricing to possibly increase slightly over the next 60 days.
  • Copper Tubing – Relative flat pricing tied to Comex.
  • Weld Fittings & Flanges –Weldbend CEO, Jim Coulas, reported three raw material cost increases in the last half of 2017. On March 16th, Weldbend put through a ~7.3% increase.   Another 8% increase is expected from Weldbend over the next 60 days.   Import fittings and flanges are moving up with the same percentages as domestic.
  • Copper Sweat / Press – Expect a 6-8% increase in 2018 Q2.
  • Iron Fittings – The 6% increase that took place in January should hold into Q3.
  • Hangers, Strut & Threaded Rod – We saw increases of 5% – 7% in March and there will be another increase of 12% to 18% in May.
  • Bronze & Iron Valves – We do not expect any price or lead time volatility through Q3.
  • Victaulic Grooved Product – 8.5% increase taken on February 2, 2018. This should hold through 2018.
  • Stainless Steel Pipe & Fittings – Stainless pipe and fittings has escalated more than 25% in the last 60 days. Surcharges relating to the price of nickel are expected to rise as supply cannot keep up with demand.  We anticipate more price increases as scarcity widens for stainless products.
  • Forged Steel Fittings & Seamless Nipples – We have seen a ~20% increase on forged steel fittings and 8% increase on seamless nipples. We expect to see another increase in both categories by the end of Q3.
  • 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.