Shipments and Supply of Sheet Products through March 2016

Table 1 shows both apparent supply and mill shipments of sheet products (shipments includes exports) side by side as a three month average through March, for both 2015 and 2016.

Apparent supply is a proxy for market demand. Comparing these two time periods total supply to the market was down by 2.4 percent and shipments were up by 4.2 percent. The fact that supply was down and US mill shipments were up means that imports put less pressure on the market than they did in most of 2015. Table 1 breaks down the total into product detail and it can be seen that for individual products there is no consistent pattern. Hot rolled and cold rolled drove the big picture on account of their volume, both saw supply decline and shipments increase comparing Q1 2016 with Q1 2015. HDG performed quite differently from other metallic coated which is mainly Galvalume. HDG was the only sheet product to enjoy an increase in demand and its mill shipments grew the most. The demand for galvalume declined the most of all products considered and its shipments declined by 18.1 percent. Electro-galvanized is the smallest volume product and it is also the only one to enjoy net exports so its relevance in these year over year comparisons is limited. Net exports of electro galvanized weakened in March.

A review of supply and shipments separately for individual sheet products is given below.

Apparent Supply is defined as domestic mill shipments to domestic locations plus imports. In three months through March 2016 the average monthly supply of sheet and strip was 4.45 million tons, down by 2.4 percent year over year as mentioned above but up by 6.3 percent compared to Q4 2015. The short term improvement (3 months) compared to the long term decline (12 months) means that momentum is very positive. Table 2 shows the change in supply by product on this basis through March. Momentum was positive for all products except electro galvanized.

Figure 1 shows the long term supply picture for the three major sheet and strip products, HR, CR and HDG since January 2003 as three month moving averages.

Figure 2 shows import market share of sheet products and includes long products for comparison.

Based on a 3MMA the import market share of sheet products has declined more or less continuously since February 2015 when it was 24.3 percent to 18.6 percent in March 2016. Long product import market share peaked at 29.4 in April last year, declined to 24.5 percent in July then increased erratically to 26.5 percent in this latest data.

Mill Shipments. Table 3 shows that total shipments of sheet and strip products including hot rolled, cold rolled and all coated products were up by 4.2 percent in 3 months through March year over year and up by 7.9 percent comparing three months through March with three months through December. (Year to date tonnage in the three months through March was the same as the 3 months y/y result).

Individual products performed quite differently, HR, CR and HDG all improved in 3 M/3M with positive momentum meaning that the improvement is accelerating. Electro galvanized declined strongly both Y/Y and 3M/3M. Other metallic coated had a small positive growth 3M/3M but declined Y/Y. Figure 3 puts the results for the three main products into the long term context since January 2003.

SMU Comment: The numbers in this report illustrate why it’s necessary to look at different time periods to try to understand the whole picture. We could draw different conclusions based on which time period we chose to describe. Another problem is that it’s now mid-May and the latest data we have for shipments and supply is for March. The AISI puts out weekly data for crude steel production the latest for which was w/e May 7th. This provides the most current data for steel mill activity. Figure 4 shows the Y/Y change in weekly crude output which didn’t become positive until March 6th.

In the latest 10 weeks there was only one week with negative Y/Y growth. Our conclusion based on the above, on the results of our key market indicators analysis, buyer sentiment and the decline in service center excess is that March was an inflection point and that for at least the next few months we will see more green in the three tables included in this report.