MSCI - Flat Rolled Inventories at 1.8 Months

Total Steel Inventories Down 49% from 2008 peak

The Metal Service Center Institute (MSCI) reported total U.S. steel shipments increased in July to 113,800 tons per day (average) which is an increase of approximately 2% compared to June. However, compared to July 2008 shipments were almost 40% lower.

Over-all inventories declined for the 11th straight month and now total 5,724,400 short tons. Based on the current sales rate total inventories are now at 2.3 months. Inventories peaked in August 2008 at 11,020,200 short tons and the new level represents a decline of approximately 49% from the peak.

Flat Rolled Inventories down to 1.8 Months

For the first time this year, flat rolled shipments increased compared to the previous month. Flat rolled shipments averaged 68,700 short tons per day in the U.S. during July - an increase of 3.3% compared to the 66,500 tons per day average in June.

What I find interesting, based on the current flat rolled shipment rate, steel service center inventories in the U.S. stand at 2,797,300 short tons or, 1.8 months supply (unadjusted – 1.9 seasonally adjusted). Flat rolled inventories peaked at 6,192,200 tons in August 2008 and are now down approximately 55% in the past 11 months.

Demand Flat

According to the MSCI data, real demand has only improved slightly. SMU market survey data is showing a slightly larger growth over the past few weeks as 17.3% of the respondents reported growth in real demand, while 7.9% say real demand is in decline and the balance – 74.8% report real demand as being “stable”.

What does this all mean? Most likely service centers will do some restocking and then maintain inventories at about 2.0 months until there is clear evidence the recession is over and real demand is improving.