Inventories Low and Profits Up for Ryerson

Carbon steel shipments totaled 374,000 tons, an increase of 12.7 percent from the previous quarter. Aluminum shipments rose by 16.3 percent to 50,000 tons and stainless steel shipments were up 10.9 percent to 71,000 tons.

CEO Eddie Lehner said, “Ryerson, on balance, sees industrial demand improving incrementally in the second quarter although some unevenness by end market remains. Further, Ryerson anticipates higher average selling prices in the second quarter of 2017 given the price stabilization experienced in the first quarter as carbon contract price increases offset some spot price moderation, aluminum prices continue to firm, and stainless pricing resets to the movement in the surcharge. The pricing fulcrum in the second quarter hinges more on mill operating rates and lead times relative to service center inventories and industry pricing to a convergence between average cost and replacement cost.”

Ryerson inventory supply was 69.1 days in first quarter, compared to 74.5 days in Q1 2016 and at its lowest level in recent history, said CFO Erich Schnaufer. Low iInventory level was a topic of discussion during the earnings call. Lehner said in regards to current low inventory levels in the market, people respond to volatility to some extent.

“There is material in the channel, if you get caught a little short there are places you can go to get it. I do think that right now things are balanced. People have referenced MSCI inventories between 1.8 months and two months relative to 2.4 months. And when you really shake it all up and pour it out again, I think right now most service centers have inventory to support the demand they have, relative to understanding the risk and the volatility that is out there. So I don’t think anyone gets pinched. When you look at April order rates and you look at past utilization rates in April, there really isn’t a compelling argument for changing behavior to a great degree one way or the other.”