SMU Service Center Inventories for August

Plate Steels = 52.1 Shipping Days of Supply

Flat Rolled

Service center flat rolled supply remained elevated in the last month with August inventories holding to 55.8 days of supply, down slightly from 56.1 in July. This is based on 22 shipping days in August and 21.5 in July. SMU received a net increase of two flat rolled data providers in August but had a small number of data providers who couldn’t report; this is why we emphasize the shipping days of supply and other calculations rather than the sheer inventory figure.

When analyzed as months of supply, August inventories represented 2.53 months of supply, down from 2.61 in July. With the slowdown in the daily shipping rate, we view the inventory level to still be elevated with lower priced material booked in July.

The percent of inventory on order has come back down to the 50s, at 53.4 percent in August. This is down from 64.8 percent in July. August’s on-order figures represent the lowest levels we’ve seen all year. Service centers had 29.8 shipping days of supply on order at the end of August, down from 36.3 in July.

The percentage of inventory committed to contracts is holding at the higher levels that began in June. The percentage of service center flat rolled inventory committed to contracts was 56.1 percent in August, up from 55.6 in July.

The August data shows us that service centers have eased up on their purchases, possibly because of general negativity related to pricing and demand outlooks. Spot prices for flat rolled steel have been edging down weekly, and the $30-40/lt month-on-month decline in September scrap prices is further contributing to the negative outlooks.

Plate Steels

The final data for plate shows the reduction of supply in August, though not as extreme as initially conveyed in the Flash Report. At the end of August, service centers carried 52.1 shipping days of supply of plate, the lowest level seen all year and down from 55.5 in July. This represents 2.37 months of supply on hand for August, down from 2.58 in July.

We saw a pickup in plate shipments in August and a need for service centers to replenish inventory. The on-order data, however, show that service centers are not ready to commit to more substantial purchases yet.  The percentage of plate inventory on order has increased to 51.5 percent from 48.9 percent. This translates to 26.9 shipping days of supply on order, nearly flat from 27.1 in July.

The mill price increases appear to have fallen flat, and we are seeing service centers replenish stock only as needed. In August, we also saw the first notable reduction in the percentage of inventory committed to contracts, which dropped to 37.7 percent in August from 40.6 percent in July. This may indicate that service center customers do not have as much appetite for long-term commitments given the market softness.