SMU Data and Models

Service Center Flat Rolled Inventories Now in a Deficit
Written by John Packard
June 20, 2016
Flat rolled steel inventories being held by U.S. steel service centers have moved from an Apparent Excess to a Deficit based on our analysis of the recently released data by the Metal Service Center institute (MSCI). We have been reporting on the reduction of the Apparent Excessive inventories being held at flat rolled steel distributors for some time now. As inventories declined and moved into a Deficit based on our model, this has help move distributors from a hold mode in buying to a much more active mode. As lead times expanded the need to buy increased which resulted in the tight negotiating positions taken by the domestic steel mills.
We see inventories moving back into an excess situation in September (minor excess) but we are not seeing a dramatic increase in inventories through the five month time period discussed in this article.
Service center shipments totaled 2,179,000 tons which was 76,000 tons less than our forecast which was based on shipments being 107,400 tons per day, the same as last year. Shipments continue to be below both the 3 year average (-6.6 percent) as well down from the prior year (-3.4 percent).
Inventories ended the month at 4,768,000 tons which was much greater than our forecast of 4,563,000 tons. Our forecast called for receipts to be 90,919 tons per day and in actuality receipts came in at 97,102 tons per day.
We did correctly forecast service center inventories would move into a Deficit which, based on our model, stands at -197,000 tons (we had forecast the deficit would be greater than the -197,000 tons).
SMU Forecast Deficit to Continue Through August
We have decided that our optimism for things to improve needs to be tempered as we move into our new forecast. Our new forecast takes into consideration the analysis of the MSCI data done by Peter Wright (produced in today’s issue as well). We are working on daily shipments to be down 4 percent year over year and receipts to be 10 percent lower than the 3 year average. The net result is a modest Apparent Deficit in June, July and August before reversing course in September.
It is our opinion that flat rolled steel prices will be relatively stable during the next 60 days and we are not expecting any large move in either direction through the next 4-5 months (assuming no changes in supply between now and then). Our pricing forecast is holding steady in the $620-$640 area.

John Packard
Read more from John PackardLatest in SMU Data and Models

SMU Survey: Sheet lead times ease further, plate hits one-year high
Steel buyers responding to this week’s SMU market survey report a continued softening in sheet lead times. Meanwhile, plate lead times have moderately extended and are at a one-year high.

SMU Survey: Buyers report more price flexibility from mills
Nearly half of the steel buyers responding to this week’s SMU market survey say domestic mills are showing increased willingness to negotiate pricing on new spot orders. This marks a significant shift from the firmer stance mills held in prior weeks.

SMU Survey: Buyers’ Sentiment Indices fall
Current Sentiment Index dropped six points to +42 this week compared to two weeks earlier. It has fallen in every successive survey since reaching a 2025 high of +66 on Feb. 19.

March service center shipments and inventories report
Steel service center shipments and inventories report through March 2024.

Apparent steel supply contracts in February
The amount of finished steel that entered the US market in February receded from January’s peak, according to our analysis of Department of Commerce and American Iron and Steel Institute (AISI) data.