Steel mill lead times are one of the key indicators of future direction of steel prices. Steel buyers must be aware of the amount of time it takes a supplier to produce and ship a new order. Lead times and balancing inventories go hand in hand. When lead times shrink, buyers can pull back on ordering steel. However, when lead times move out (extend) steel buyers have to increase purchases to make sure their company does not run out of product.
There are two ways to look at mill lead times. A buyer’s primary focus is on the suppliers being used or considered. They would review the lead times sheets (or verbal promises made by their salesperson) sent to them by their suppliers. The second way is to review the industry average which is produced by Steel Market Update during our flat rolled steel market trends analysis which is produced twice per month.
We last finished a market trends analysis on the 10th of March. At that time, we saw hot rolled averaging 4.38 weeks, cold rolled 6.53 weeks, galvanized 6.86 weeks and Galvalume 6.93 weeks. As we look at the graph produced at that time we found lead times as being the same or slightly lower than year ago levels. One year ago lead times were surging and prices were on the move (albeit from very low levels) before peaking during the first week of June at $635 per ton (last week SMU average on HRC was $645 per ton).
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