Service Centers

Service Centers Managing Their Inventories in Supply Constrained Market

Written by John Packard

In order for prices to reverse course, service center inventories will need to grow which would ultimately slow mill order books and relax lead times. The service centers we spoke with today were almost unanimous in their opinion that now is not a good time (or any easy time) to build inventories. However, there were mixed responses when it came to selling the competition inventory out of their plants.

Here are some of the comments we received on the subject:

“Some mills are very much on allocation, and not building inventory unless it is sold.”

“We do sell into the spot market, it is competitive as ever with a lot of resistance.  Some customers are “enlightened” and are paying and others are not.  We have more opportunities than we can currently support.  Inventories have remained stable, this is a good time to build inventory if it is all locked down on customer P.O.’s“

“There is resistance to price increases but that is usually a good thing. We can’t build inventories even if we wanted to, but we are mostly getting the steel we need on a prioritized list. We have seen other service centers that are in dire need and have paid us $27 for coils to tide them over in certain spots.”

“Not sure anyone could or would want to build inventory right now.  We will sell anyone at a replacement plus selling price and are actually quite active.  Lots of holes in people’s inventories right now.”

“…With limited spot market exposure, we are seeing only a bit of pressure – but it appears that inquiries are on the rise. Again, limited spot exposure – but resistance does exist. No mercy however. We are not building inventories, and are not actively selling other service centers.”

“As we saw increases coming, we have loaded up on inventory.  From what I gather though, most service centers have not done as such.  We are thus selling to a lot of service centers.”

“Our purchasing department has seen this coming for some time now, they have put us is a good position. Now is not the time to build inventory. We are getting calls from other service centers every day, we cannot afford to sell inventory to our competition. Your inventory is like Gold right now, it is growing like a good investment. These opportunities don’t come along that often in the Steel business.”

“It’s crazy out here.  The market is indeed schizophrenic.  I’ve got open mill POs with a base price delta of over $14/cwt now.  This is making quoting very confusing as we and our competitors try to determine which pieces of business are protected on Mill contracts and which are exposed to spot pricing. It might be a good time to remind buyers to consider strongly before rejecting or refusing steel for minor issues.”

“We are building inventories in CR.  That inventory is coming from foreign sources through October, 2016.  The coated supply is basically domestic and we are not able to build inventory.  However, it looks like the domestics are catching up and I would be very concerned about panic buys.” Are you selling other service centers at this time? “No thank you!”

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