Shipments and Supply of Sheet Products through July 2016

Apparent supply is a proxy for market demand. Comparing these two time periods total supply to the market was up by 0.9 percent and shipments were up by 3.5 percent. The fact that shipments were up by more than supply means that over a three month time period imports put less pressure on the market than they did this time last year however it looks as though that is changing as import market share in June and July has increased. Table 1 breaks down the total into product detail and it can be seen that momentum was positive for all products except electro-galvanized which is a special case because EG has a trade surplus, and other metallic coated (mainly Galvalume).

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

Apparent Supply

Apparent Supply is defined as domestic mill shipments to domestic locations plus imports. In three months through July 2016 the average monthly supply of sheet and strip was 4.804 million tons, up by 0.9 percent year over year as mentioned above but up by 5.7 percent comparing May through July with the previous three months. The short term improvement (3 months) compared to the long term improvement (12 months) means that momentum continues to be positive. Table 2 shows the change in supply by product on this basis through July. 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 and the improvement that has occurred this year.

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 declined from 24.3 percent in March last year to 17.4 percent in May this year and has increased to 19.7 percent in July. Long product import market share peaked at 29.4 in July last year, declined abruptly to 24.5 percent in July 2015 and now stands at 26.4 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 3.5 percent in 3 months through July year over year and up by 2.8 percent comparing three months through July with three months through April.

Momentum for the total shipments of sheet and strip products was negative because the 3 month growth (2.8 percent) was less than the 12 month result (3.5 percent). This was not true of all the individual products. HRC and EG had positive momentum but CRC, HDG and other metallic coated had negative momentum. Figure 3 puts the shipment results for the three main products into the long term context since January 2003. All three have had positive growth this year but early indications are that all three are rolling over.

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. Shipments and supply of total sheet products are both still experiencing positive Y/Y growth but the growth of shipments may be going into decline as supply growth for HDG and CRC is hesitating. A problem with this data is that it’s now mid-September and the latest data we have for shipments and supply is for July. The AISI puts out weekly data for crude steel production the latest for which was w/e September 3rd. This provides the most current data for steel mill activity. Figure 4 shows the Y/Y change in weekly crude output on a four week moving average basis.

Growth became positive in w/e March 5th and in the next 19 weeks there was only one week with negative Y/Y growth. Growth became negative again in w/e July 23rd and continued to deteriorate since then. Note, this is not a summer slowdown as we are considering Y/Y data. This deterioration in weekly crude steel production may be a harbinger of further declines in shipments of sheet products which as shown in Figure 3 above began to roll over in July. Import market share is up and through July there has been no decline in total supply of sheet products. Our key market indicators data is mostly still trending positive and our SMU buyer’s sentiment index is still very positive.