Structural Tubing Outlook 2019
A Strong Foundation
By Dan Markham
on Apr 17, 2019
Strip away the lingering questions on price, tariffs and other questions, and producers and suppliers of structural tubing are in general agreement: the market for the product remains perfectly fine.
“Demand is pretty good right now, knock on steel,” says Damon Gaynor, vice president of sales for Industrial Tube & Steel, West Chester, Ohio. “I don’t think it’s going to go gangbusters. But I do think we’ll stay fairly consistent with last year, and I’m OK with that.”
“There’s a tremendous pull on the marketplace that relates to end use demand. Our customers talk about their business being very good,” says Andrew Weston, vice president of sales for the Industrial Tube Division of Welded Tube of Canada.
Fueling the optimism is continued strength in nonresidential construction and transportation and hopes for growth in heavy equipment, most notably ag machinery.
“Construction is still really strong out here,” Totten Tubes CEO Greg Totten says of the environment on the West Coast, where his company is based. “And that’s our biggest driver.”
Likewise, “Trailer manufacturers are doing extremely well, and there’s no reason that won’t continue. You still need to move goods from Point A to Point B, whether there’s a driver or it’s an autonomous vehicle,” says Rick St. John, who runs the tubing division for Triad Metals, Horsham, Pa.
What would take the market from good to great, he says, is a legitimate infrastructure project, not the wall, or the government’s typical paper-thin efforts on highways and other locations. “Not paving roads, not paving airport runways. But work on our ports, so deepwater vessels that come through the Panama Canal can dock on the Eastern Seaboard. Spending on bridges and schools and military barracks and training centers. All of us could benefit from that,” St. John says.
Sadly, the likelihood of such a bill grows dimmer by the day, particularly as the government spent the first weeks of the new year in shutdown mode. Of course, that’s just one political issue that’s affecting the market.
Nearly one year in, it’s still impossible to ignore the overhanging questions involving Section 232 and its effects on the steel market. And with two major structural tubing producers sitting inside North America but outside the United States, and the ever-present concern of competing materials, the questions are even more front and center.
Atlas Tube and Welded Tube of Canada have long been among the most significant players in structural tubing, joined by U.S. producers such as Nucor Tubular, Bull Moose and others. With the 25 percent tariff that accompanied the Section 232 determination in the first quarter, the companies had a difficult decision to make.
“Atlas, right from the beginning, said it was going to eat the tariff to stay competitive with the U.S. market. I’m curious to see how long they can keep that up,” says Gaynor.
For Welded Tube of Canada, the tariff presents a challenge, but it ultimately chose to think long-term. “For the most part, we see the tariff as a short-term condition that needs to be dealt with and confronted at the government level,” says Weston. “We have a lot of strong relationships in the United States, and we have to maintain our presence there. We will not lose our foothold in the U.S. market for something we perceive as a moment in time.”
While Canadian producers had tough choices, such was not the case for American producer Bull Moose Tube, Chesterfield, Mo., which makes Hollow Structural Sections. The company enjoyed a record year in 2018. “I’m sure it had a lot to do with the tariffs. Domestic steel prices rose, and with a high tide, all ships rise,” says Mark Abernathy, manager of engineered sales.
In contrast, Valmont Industries saw some pricing pressure on its corner of the structural tubing market. Its structural tube product, HSS SuperStruct, is made from plate rather than coil, and plate pricing bumped up even more than coil, while lead times were also an issue. “Our product was replaced by I-beams in a number of projects. They could get the I-beams cheaper and faster, which is why it was somewhat of an average year,” says Brad Nelson, national sales manager for the Omaha-based producer.
The tariffs triggered some supply concerns from distributors, though executives say the process went smoother than expected.
“Overnight I had to go find new sources. Not for everything, but for certain products. There were some stressful moments, some rekindling of old relationships, but for the most part it worked out,” says St. John.
“It felt like we were always hustling to keep material on the floor, but when all was said and done, we really didn’t have any shortages or problems getting material,” says Paul Totten, COO of Totten Tubes, Azusa, Calif.
Most, like Bull Moose’s Abernathy, believe the tariffs won’t be around forever. “We expect 232 to disappear at some point and imports to come back in. We hope we’ve grabbed enough market share to remain competitive and maintain the success we’re currently enjoying.”
Beyond trade, another issue that has St. John’s attention involves the goings on at the Federal Reserve. “I would not want to see interest rates go up much more. Some of our customers, whether they’re a distributor or a manufacturer or fabricator, are interest-rate sensitive, financing their inventory or their receivables. They won’t bring in as much when it’s going to cost them a lot more.”