Service Centers Apparent Flat Rolled Inventory Deficit at 632,000 Tons

In the table below, we are sharing the shipment data and inventory data as produced by the MSCI. We also show the number of shipping days in each month as well as the receipts (total and by day). The Apparent Excess or Deficit is based on a proprietary formula part of which is based on our forecast for shipments and receipts for the month. As you can see we are forecasting flat rolled steel inventory deficits through the next five months. The “kicker” will be whether foreign imports are being added to inventory or replacing domestic mill shipments. For the month of May we thought there would be growth in steel distributor inventories which did not occur. We will see what June brings.

As we move into the June through October, Steel Market Update is projecting a continuation of the negative steel inventories at the service center level even though we are forecasting shipments to be up 6 percent year-over-year. We are projecting inventories will remain negative by approximately 500,000 tons each month through October 2014. This would be good news for the domestic steel mills.

We have adjusted our SMU hot rolled coil price forecast to reflect the anticipated negative inventory position over an extended period of time at the service centers. We believe prices will move lower through the end of June, trend sideways to slightly lower in July and then rise in August and September.