After reaching bottom in June, due largely to the global pandemic, mill shipments and supply of sheet products have since maintained a slow but steady upward trajectory.
This analysis is based on steel mill shipment data from the American Iron and Steel Institute (AISI) and import-export data from the U.S. Department of Commerce. The analysis summarizes total steel supply by product from 2008 through October 2020 and year-on-year changes. The supply data is a proxy for market demand, which does not take into consideration inventory changes in the supply chain. Our analysis compares domestic mill shipments with total supply to the market. It quantifies market direction by product and enables a side-by-side comparison of the degree to which imports have absorbed demand.
Much of the market is still in recovery mode after the sharp decline in shipments and supply of steel products during the second quarter of 2020. Although some impact is still being felt across a few pockets of the U.S. domestic market, overall sentiment and apparent supply are rather positive. Despite the steady gains, the three-month moving averages (3MMAs) as well as year-over-year figures are still down noticeably due to the Q2 slump. As a result, pre-pandemic levels are still a ways away; however, the steady recovery has been a welcomed sight. Even though many believe the bottom was reached in June, and the market can only go up from there, there are some concerns of a potential near-term downturn as a result of a renewed Covid-19 surge.
Figure 1 shows the sudden decline in raw steel production that began in February and mirrors the rate of decline experienced in late 2008, though the total fall this time has not been as significant. The year-over-year decline in 2020 maxed out at 37.3 percent in the week ending May 16 and has since improved to negative 16.2 percent in the week ending Dec. 12. Back in 2009, the maximum rate of decline year over year was 54.3 percent in the week ending Jan. 17, 2009. These are four-week moving averages and are based on weekly data from the AISI.
This shipments and supply report is based on monthly shipments by product as reported by the AISI, plus import and export data from the DOC. Figure 2 shows the monthly shipment data for all rolled steel products. In the long run the trajectories of growth in Figures 1 and 2 are comparable, both seeing a turn and slight rise since the bottom was reached in June. Through the October three-month moving average of the monthly data, gains have been consistent, even if limited. October was 6,992,134 tons compared to 6,708,122 tons in September, an increase of nearly 4.1 percent, yet down nearly 21.0 percent year on year when total monthly shipments (3MMA) hit 8,425,653 tons. These figures highlight that the overall physical market is matching sentiment; however, the rebound is certainly at a slow but steady pace.
Table 1 includes the shipment and supply details for all product groups. Total supply (proxy for market demand) as a 3MMA was down by 21.3 percent year over year. Although down, it has seen a steady improvement month over month since June when it was a negative 28.1 percent. Apparent supply is defined as domestic mill shipments to domestic locations plus imports. Mill shipments improved to a negative 17.0 percent, compared to a negative 20.7 percent the month prior and a vast improvement from negative 29.1 percent in June when the market was at its lowest.
While imports still took a noticeable market share in the three months through October year-over-year, they have certainly waned since late Q2. There is still a major variance between products. Even though a decline across all products was seen, tubular products continue to be the most impacted. The supply of sheet products was down by 13.6 percent in three months through October year-over-year, and domestic mill shipments were down by 11.3 percent, a vast improvement from negative 26.7 percent in June.
The total of long products supply was down by 25.9 percent, while shipments were down by 24.4 percent. There was nearly a 3.5 percent improvement in supply and shipments of long products month on month. Despite the notable negative trend, improvements were seen across all products since June.
Table 2 describes both apparent supply and mill shipments of individual sheet products (shipments includes exports) side-by-side as three-month averages through October with year-over-year growth rates for each. Overall, sheet products are down, though there are a few bright spots. Both electrolytic galvanized and other metallic coated experienced noteworthy moves on a three-month moving average. Hot rolled was down the most for both supply and shipments at negative 18.4 percent and negative 16.2 percent, respectively. In the three months through October 2020, the average monthly supply of sheet and strip was 4.119 million tons, down from 4.767 million tons the year prior. There is no seasonal manipulation of any of these numbers. By definition, year-over-year comparisons have seasonality removed.
Table 3 shows that total sheet and strip products were down by 11.0 percent year to date compared to 2019; however, there was a 12.0 percent improvement month on month. Overall, all sheet products were down significantly year over year, except for other metallic coated. As a 3MMA, however, it’s important to note that all products have continued to turn, in some cases, markedly. Electrolytic galvanized experience the most accentuated gain despite still being down 22.6 percent year to date compared to 2019; however, it was up 107.4 percent on a 3MMA basis from 21,772 tons in July to 45,176 in October. Despite the severity of the second quarter of 2020, data continues to support the improving market sentiment. The two far right columns compare the second quarter with the first and the second quarter with Q2 2019, respectively.
Figure 3 shows the long-term supply picture for the three major sheet and strip products—HRC, CRC and HDG—since August 2008 as three-month moving averages. All three have experienced consistent improvement since reaching bottom back in June. Both hot rolled and cold rolled have increased by 5.9 percent and 8.4 percent, respectively. However, hot-dipped galvanized has seen a 23.7 percent jump since June.
Figure 4 shows the long-term comparison between flat and long products. These are monthly numbers (not 3MMAs), and clearly show the trend difference between longs and flat products including plate.
David SchollaertRead more from David Schollaert
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