Based on Steel Market Update (SMU) analysis of the recently released MSCI service center inventory and shipment data, total service center carbon steel shipments decreased by 178,700 tons in May to 3.126 million tons. Shipping days at 20, were two less than in April. On a tons per day basis (t/d) shipments increased from 150,200 in April to 156,300 in May.
In the twelve years since 2004 May shipments on average have been up by 2.2 percent from April, this year shipments were up by 4.1 percent. May was the first month this year in which the shipment change month over month was better than the 12 year average. Figure 1 demonstrates the seasonality of service center shipments and why comparing a month’s performance with the previous month is usually misleading. For this reason in the SMU analysis we always consider year over year changes.
Table 1 shows the performance by product in May compared to the same month last year and also with the average t/d for May in the last three years. We then calculate the percent change between May 2015 and May 2014 and with the 3 year May average. We hope this give the best view of market direction.
In May intake at 148,700 tons was 7,600 tons less than shipments. Pipe and tube was the only product for which intake was more than shipments in May. Shipments of all products on a t/d basis were down by 8.4 percent from May last year and were 3.5 percent less than the average May shipments for 2015, 2014 and 2013. The fact that the single month growth comparison is worse than the three year comparison is an indication that momentum is negative and growth is slowing. Shipments of all products were down year over year on a tons/day basis.
May closed with months on hand, (MoH) at 2.81, up from 2.72 at the end of April and up from 2.22 at the end of May last year. All products except bar sized shapes had a year over year inventory increase led by plate which was up by 17.4 percent. Figure 2 shows the MoH by product monthly since January 2009. Plate products shot up to over 4 MoH at the end of November and were still high at 3.38 at the end of May. Pipe and tube closed out May with 3.38 MoH.
There continues to be a wide difference between the performances 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. On a 3MMA basis y/y, the growth of shipments was negative for 21 straight months until April last year which was the first of eleven months of growth. However in March on a y/y basis shipment growth returned to negative territory at -2.6 percent followed by April at -7.6 percent and May at -11.6 percent, (Figure 3).
Flat rolled has had a much better recovery since mid-2009 and had positive y/y growth for 18 straight months through January this year. In February growth slowed to zero, in March came in at negative 1.6 percent followed by April at -6.6 percent, and -8.3 percent in May (Figure 4).
In 2006 and 2007, the mills and service centers were operating at maximum capacity. Figure 5 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 service center shipments of each product have recovered.
Again it can be seen that bar and structurals have the worst record. Sheet and plate have had the best recovery since the recession followed by tubulars. Even so the recovery of sheet is only at 82.0 percent and plate at 83.8 percent. The total of carbon steel products is now at 73.6 percent of the shipping rate that existed in 2006 and 2007, with structurals and bar at 54.6 percent and 56.7 percent respectively.
MSCI uses product nomenclature flat and plate. In this analysis at SMU we replace the term flat with sheet. By our interpretation of the MSCI’s data their definition of “flat” is all hot rolled, cold rolled and coated sheet products. Since most of our readers are sheet oriented we have removed plate from Figure 4 to highlight the history of sheet products which are shown in (Figure 6).
Following the strong post-recession recovery, sheet products experienced 9 months of decline from October 2012 through June 2013. This was followed by eighteen months of growth through January this year but February slipped back into negative territory at -0.7 percent year over year, the March result was -2.3 percent followed by April at -7.3 percent and May at -9.1 percent.
SMU Comment: Compared to April the May result doesn’t look too bad but on a year over year basis the performance shows a deteriorating trend with shipments down for all products and inventories up for all products except small shapes.
The SMU data base contains many more product specific charts than can be shown in this brief review. For each product we have ten year charts for shipments, intake, inventory tonnage and months on hand. Readers are welcome to these on request.
Peter WrightRead more from Peter Wright
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