Steel Product Shipments and Inventories Through September

Written by David Schollaert

Downstream steel product shipments continue to improve, though slower than the overall manufacturing economy. The fallout driven by the first wave of the global pandemic back in April is still evident in the data despite the steady rebound.

The Census Bureau provides monthly data on inventories, shipments and new orders for total U.S. manufacturing and for individual industries, one of which is steel products. Every two months, Steel Market Update analyzes Census data to provide a reality check for steel industry trade association data, which is most widely used to assess the state of the industry.

Total shipments and inventories are reported in millions of dollars seasonally adjusted. Year over year through September, total manufactured product shipments declined by 3.3 percent, while steel product shipments declined by 8.5 percent. Figure 1 and Figure 2 show the history of both since 2005. During the first wave of the global pandemic in April, total manufacturing shipments plunged by 19.4 percent and steel product shipments fell by 21.4 percent compared with the prior year. Steel has steadily recovered since, though at a slower pace than manufacturing overall.

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Figure 2 shows monthly steel product shipments in millions of dollars with the year-over-year growth through September. Through the first nine months of 2020, shipments of steel products totaled $83.6 billion, down 13.5 percent from year-ago levels when shipments were $94.6 billion. Shipments of steel products most recently peaked in November 2018, then began a 17-month decline through April 2020. Although the growth rate has declined from 18.6 percent in August 2018 to a negative 8.5 percent through September, shipments of steel products are up 8.4 percent since reaching bottom this past April.

Steel Market Update aims to provide information on the same subject from different sources for verification. The data in Figure 2 compares well over the long term with the AISI weekly crude steel production shown in Figure 3, which is more recent than the Census data. Figure 2 is in dollars and Figure 3 is in tons, yet they paint a similar picture. Despite the freefall that came to an end in late May, according AISI data shown in Figure 3 on a four-week moving average basis, a noticeable recovery has been under way since. Nevertheless, production remained down by 14.8 percent in the week ending Dec. 5 year over year.

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Figure 4 shows shipments and new orders on a monthly basis for all steel products since 2010. New orders declined much more than shipments in April, but were back in balance by June and have now exceeded shipments. This dynamic supports the near historic highs seen for flat rolled steel prices.

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Figure 5 shows the same total shipment line as Figure 2, but now includes the inventory-to-shipment ratio. The IS ratio shot up in April, but has since declined to the recent norm.  The IS ratio is a measure of how much inventory is necessary to support the level of shipments, thus the lower the inventory-to-shipment ratio the better. Shipments have improved by 9.2 percent since May.

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Figure 6 shows total inventory in millions of dollars and repeats the inventory-to-shipment ratio shown in Figure 5.

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SMU Comment: The decline in both manufactured and iron and steel product shipments, although severe, was nowhere near as painful or prolonged as was the case during the most recent recession in 2009. Data from the Census Bureau for steel product orders, shipments and inventories indicates that steel product shipments were hit harder than total manufacturing in April and May. The inventory-to-shipment ratio of both total manufactured goods and products made from iron and steel peaked in April and declined through September.

David Schollaert

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