SMU Data and Models

SMU Index: Mild Decrease in Service Center Inventories

Written by John Packard


As Steel Market Update analyzed the inventory data received from flat rolled steel distributors, we found the number of months of supply that steel service centers are carrying was lower at the end of March than what we reported at the end of February. With 96 percent of our data providers reporting, the number of months of supply dropped from 2.8 months to 2.7 months.

What we found interesting as we analyzed the data is the adjustments, whether up or down, were modest with most distributors reporting changes of 0.25 of a month or less.

Of the distributors reporting, 58 percent reported lower inventories, 22 percent reported carrying higher inventories and 20 percent reported their number of months supply as being the same in March as in February.

While asking our data providers information about their inventories, we also inquired about demand during the month of March, as well as any difficulties they had in getting material delivered into their facilities. Here are some of the responses received:

March Demand Drivers

“Construction seems to be picking up and most of our OEMs are drawing to their forecasts or slightly better. Of course, we have several accounts who did not have stable sourcing plans that are scrambling to find competitive steel, but that’s a tough position to be in today. We help where we can but there is not a lot of open tonnage available at anything other than the ‘spot’ premium.”

“Demand continues very steady. We are even more margin-driven than normal in this environment, so shipped volume, while flat with 2017, means very little. It’s all about using this market to take care of loyal customers, increasing penetration with strategic target accounts, and being nimble to handle quick turnaround spot orders where margins are highest. Because we have solid inventories, we are well-positioned to thrive in this market.”

“Demand is solidly up across the board. Have not seen panic-type buying like we did in 2008.”

“Shipments were actually off in March, but I think it was just bad timing. April shipments look like they will be very strong.” 

“Overall demand is stronger year over year in our main market sectors.  Like a lot of OEMs and SCs, we built some inventory ahead of the 232 and higher domestic pricing.”

“We see demand strong and getting stronger due to seasonality.”

“April demand is much like March. Solid. Our bigger issues are new customers that are willing to place business with us, but we are unable to procure the extra tons. Additionally, we are already being advised of ‘maintenance shutdowns’ in the coming months. Continued uncertainty and constant changes regarding 232 and exclusions, quotas, etc., is causing a lot of anxiety in the market. One change in status can change your entire business plan.”

“March sales were very strong, 17 percent above expectations for the steel side; the manufacturing side was flat.  We expect a similar April as supply is very tight and panic buying is still the word of the day.”

“We have had four months in a row of above average steel sales. Contractors were rushing to the market in fear of a steel shortage to cover jobs they had on the books. This will come back to bite us as we have pulled sales forward. I project April will remain at or above average as some March sales were pushed into April and to cover any contractors late to the party. I also predict we will see a dip in steel sales in May.”

“Steady demand for April, our inventories should come down by 0.5 month or so in April.”

“Plate feels very tight as demand is growing well, and imports had already been cut by the trade case. I expect the HRC to plate spread to grow.  Otherwise, I think HRC should be near a top unless there’s a new quota-based shock.  As we discussed previously, the HRC to CRC spread is still under pressure.”

Difficulties Getting Orders into their Plants

“The mills are all complaining about getting trucks and railcars, but to date we’ve been able to manage. We haven’t experienced much in the way of mills unusually missing their confirmed shipping dates due to overbooking or anything like that.”

“Mills are late, and trucks are hard to find right now.”

“Plate is becoming a real problem. They closed books, skipped May, and June is up in the air (price and promise dates). Just had April orders promised for June, as an example.”

“Yes, having difficulty getting steel out of one of the [mill name removed] plants. They are six weeks late on orders.” 

“No issues whatsoever – mill OTD [on-time delivery] from our supplier base for March was excellent.”

“Trucks are a nightmare, but it hasn’t affected our inventory to this point.”

The SMU service center inventories report is based on data provided directly to Steel Market Update and is in no way associated with the Metals Service Center Institute, which produces its own report expected to be released early next week.

“We are seeing about 25 percent of our mill orders arrive more than two weeks late.”

“All mills are shipping late still except for Nucor; they are shipping on time now. Has a large impact on meeting my customer delivery times; I have had to move some from rail to truck and pay more freight most of March. All mills still have me on allocation for May production.”

“Domestic mills are more difficult to deal with than the import mills. Prices are always higher and delivery performance is poor, and they blame it on the market.”

Steel Market Update has been reporting our own service center flat rolled months of supply inventory index since July 2017. This product, once it is a year old, will only be provided to our Premium level member companies, as well as those who participate (confidentially) in this index. We will continue to add new services centers and expand our index to include plate products in the coming months. If you would like more information about becoming a data provider, please contact John@SteelMarketUpdate.com

Latest in SMU Data and Models

SMU market survey results now available

The latest SMU market survey results are now available on our website to all premium members. After logging in at steelmarketupdate.com, visit the pricing and analysis tab and look under the “survey results” section for “latest survey results.” Historical survey results are also available under that selection. If you need help accessing the survey results, or if your company would like to have your voice heard in our future surveys, contact info@steelmarketupdate.com.