Steel Mills

Service Center Intake, Shipments and Inventory January 2014

February 20, 2014

Total service center carbon steel shipments jumped by 662,100 tons in January which was a smaller start-of-year bounce than either 2012 or 2013. January tons per day shipments increased by 24,000 to 158,500 tons. In January 2012 and 2013, tons per day shipments increased by 35,000 and 38,000 tons, respectively.

Intake was 167,100 tons, leading to a surplus of 8,600 tons, month end inventory increased by 189,000 tons to 8,081,000 tons. Months on hand declined from 2.79 to 2.32. These inventory statements sound contradictory but this is because MoH is calculated using the month’s shipments and surplus, as described here, is calculated on daily shipments. Daily intake in January improved from 151,760 in December to 167,100 tons in January. Table 1 shows the performance by product in the period November through January compared to the same period in previous years. On a three month moving average (3MMA) basis year over year, total shipments were up by 4.7 percent driven entirely by plate and sheet. Long products, (bar and structurals), and pipe and tube all declined year over year. Intake followed exactly the same trends as shipments. Compared to the end of January, last year inventories were down by 2.7 percent in total, only structurals experienced an increase. Sheet product inventories were down by 2.4 percent.

Looking at relatively short term data, such as described above, does not give the full picture. In 2006 and 2007, the good old days, the mills and service centers were operating at maximum capacity. Figure 1 takes the shipments by product since that time frame and indexes them to the average for 2006 and 2007 in order to measure the extent to which each product’s shipments from service centers has recovered. It can be seen that sheet and plate have fared best but are still little better than 80 percent of the pre-recessionary level. Structurals are still only at 58 percent of where they were. The total of all carbon products is still only at 74.7 percent of the 2006/2007 average therefore is down by 25.3 percent. The recovery of the service center sector has been much slower than has been experienced by the mills. Based on product shipment data from AISI, the average monthly carbon steel shipments from the mills in 2006 and 2007 was 8,612,596 tons. In Q4 2013 the average monthly mill shipments was 7,553,668 tons, a decline of 12.3 percent from 2006 /2007. Therefore, it appears that service centers shipments are off by almost exactly twice the deficit being experienced by the mills. Presumably this is because in a relatively lack luster market, more buyers are by-passing service centers and buying mill direct.

Sheet products in this analysis are what the MSCI calls carbon flat. To avoid confusion with plate we are substituting the word sheet for flat. By our interpretation of the MSCI’s data our definition of sheet is all hot rolled, cold rolled and coated products. Figure 2 shows the history of sheet product shipments and the year over year growth rate since the year 2000. Positive year over year growth has occurred in each of the last seven months following nine consecutive months of decline.