Service Centers Reducing Inventories as Spot Price Declines Continue

As you can see by the graphic share below, service center spot prices have been in disarray going back to 4th Quarter 2014. The main reason for this weakness in spot prices is due to service centers carrying excessive inventory levels and, by lowering spot prices, they are trying to move inventories to the end users and to other service centers.

From a service center perspective, the conditions are not quite as dire as what they (and the manufacturing community) were reporting during January, February and the first week of March. Over the past two surveys the percentage of service centers reporting spot prices as declining has remained steady at 66 percent. This does not mean service center inventories are in balance but, that they are most likely heading in the right direction.

The Metal Service Center Institute (MSCI) reports shipment and inventory data tomorrow (Wednesday, April 15th) and we will learn more as to where inventories are for the flat rolled steel service centers in the United States.

In the meantime, Steel Market Update does ask our service center respondents to provide an average of  the number of months of inventories that they have on their floor. In the survey completed this past week our service center respondents reported a reduction of inventories to 2.25 months supply.

We defer to the MSCI numbers as being the most accurate. However, we believe that our results are indicative of the trend which should be for the MSCI inventory levels to drop in March and to continue to drop in April.

All of the information contained in this article is available on our website to our Premium level members in a Power Point presentation and we have a number of the data sets available using our interactive graphing and table tools.