Service Center Intake, Shipments and Inventory in November

Table 1 shows the performance by product in November compared to the same month last year and also with the average t/d for November 2014, November 2013 and November 2012. We then calculate the percent change between November 2014, November 2013 and with the 3 year November average. We hope this give the best view of market direction. In November intake at 150,700 tons trailed shipments by 6,100 tons. Shipments of all products on a t/d basis were up by 6.8 percent from November last year and up by 5.9 percent from the average November shipments for 2014, 2013 and 2012. The fact that the single month growth comparison is higher than the three year comparison is an indication that momentum is positive and growth is accelerating. This is particularly true of long products (finally!); pipe and tube had 0.6 percent positive momentum and sheet products had zero momentum with 7.0 percent growth on both time comparisons. Plate had negative momentum of 2.3 percent.

In November all products had an intake deficit. Months on hand (MoH) increased from 2.35 at the end of October to 2.92 at the end of November.

Compared to the end of November last year, moth end inventories were up by 15.5 percent in total, with only pipe and tube experiencing a contraction. The flat product inventory growth was similar to October with plate up an additional 23.0 percent and sheet by 19.1 percent in November. Figure 2 shows the MoH by product since January 2009. Comparing the end of October inventories with the end of September the inventories of all products declined as measured by months on hand but in November all increased rather dramatically. Sheet products constitute by far the largest segment of service center’s business, have had the best inventory management since 2009 but even so increased to 2.7 MoH at the end of November.

There continues to be a wide difference between the performances of flat rolled (sheet + plate) and long products (structurals + bar) at the service center level. Long products have had a very poor recovery from the recession. On a 3MMA basis y/y, the growth of shipments was negative for 21 straight months until April this year which was the first of eight straight months of growth, (Figure 3).

Note that Figure 3 is a 3MMA and the November y/y improvement hasn’t shown up yet. Flat rolled has had a much better recovery since mid-2009 and has had positive y/y growth in each of the last sixteen months, (Figure 4). In 2006 and 2007, the mills and service centers were operating at maximum capacity.

Figure 5 takes the shipments by product since that time frame and indexes them to the average for 2006 and 2007 in order to measure the extent to which service center shipments of each product have recovered. Again it can be seen that bar and structurals have the worst record. Sheet and plate have had the best recovery since the recession followed by tubulars. Plate took a dive in November. Even so the recovery of sheet is only at 82.5 percent and plate at 76.7 percent. The total of carbon steel products is now at 73.9 percent of the shipping rate that existed in 2006 and 2007, with structurals and bar at 57.5 percent and 58.7 percent respectively. The recovery of the service center sector has been much slower than has been experienced by the mills. Presumably this is because more buyers are purchasing mill direct and this is probably particularly true of long products. In addition long products being more construction oriented are suffering from the slow recovery of that business sector.

MSCI uses product nomenclature flat and plate. In this analysis at SMU we replace the term flat with sheet. By our interpretation of the MSCI’s data their definition of “flat” is all hot rolled, cold rolled and coated sheet products. Since most of our readers are sheet oriented we have removed plate from Figure 4 to highlight the history of sheet products which are shown in Figure 6. Positive year over year growth has occurred in each of the last seventeen months following nine consecutive months of decline.

The SMU data base contains many more product specific charts than can be shown in this brief review. For each product we have ten year charts for shipments, intake, inventory tonnage and months on hand. Readers are welcome to these on request but please don’t ask for all of them at once!