Service Center Intake, Shipments and Inventory in April 2014

 
There is a wide difference between the performance of flat rolled, (sheet + plate) and long products, (structurals + bar) at the service center level. Long products have had a very poor recovery from the recession and on a 3MMA basis y/y, April was the first month of positive growth after 21 straight months of decline, (Figure 1).

Flat rolled has had a much better recovery since mid-2009 and has had positive y/y growth in each of the last nine months, (Figure 2).

In 2006 and 2007, the good old days, the mills and service centers were operating at maximum capacity. Figure 3 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.

Again, it can be seen that sheet and plate have fared best, bar and structurals the worst and tubulars in between. Sheet has had the best recovery and in April exceeded 90 percent of the 2006 / 2007 average for the first time since the recession. Structurals are still only at 62.0 percent of where they were. The total of all carbon products is still only at 81.6 percent of the 2006 / 2007 average, and, therefore, is down by 18.4 percent. The recovery of the service center sector has been much slower than has been 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 and this is probably particularly true of long products. In addition, long products being more construction oriented are suffering from prevailing conditions in that business sector.

MSCI uses product nomenclature flat and plate. In our analysis at SMU we replace the term flat with sheet. By our interpretation of the MSCI’s data, our definition of sheet is all hot rolled, cold rolled and coated products. Since most of our readers are sheet oriented we have removed plate from Figure 3 to highlight the history of sheet products, (Figure 4). Positive year over year growth has occurred in each of the last ten months following nine consecutive months of decline.

Figure 5 shows the change of inventory at service centers since 2009 measured as months on hand. All products except bar and sheet experienced a decline in months on hand at the end of April. Sheet products constitute by far the largest segment of service center’s business and they have had the best inventory management since 2009 and currently have the lowest months on hand.