Flat Rolled Inventories Break Through 3 Months of Supply

The number of months of supply is not a surprise to the service centers who provided comments about the month of December. It is normal for those associated with contract customers to protect against price increases by buying inventory ahead of the New Year. It is also normal for shipments to be lower during the month of December due to the holidays and inventory taxes that are levied in certain states.

About 58 percent of the responding companies reported having increased the number of months of supply by the end of December. Another 31 percent reduced supply and 11 percent reported the number of months as the same as they reported at the end of November 2017.

Here are some of the comments made during the collection process:

“We are at 3.1 due to softer shipments in December and higher receipts for our contract customers. Our order [rate] is down, so we expect inventories to fall over the next eight weeks and settle back at a more normal number.”

“We had 2.36 months’ supply at the end of December. We would have built inventories a bit more (closer to 2.5 months), but had a strong sales month in December. Sales in December were 13.7 percent more than November. Most of the increase in sales was due to price increases. We look for more price increases as we enter 2018.”

“Inbound receipt of material from vendors was limited and held off where possible. This contributed to a drop in the months inventory on hand. Pull rate from customers was lower than anticipated and the above action helped buffer this issue.”

“We were just over four months of flat-rolled inventory at the end of December, at about 4.1 months on hand. Down a little from earlier in December. We shipped strongly in December, and do expect a strong start to the year. We did ship more flat-rolled this December over last December, and shipped strongly until Friday 12/22. Our solid shipments lasted later into December than is typical with the holidays approaching. We also shipped better last week than usual (but well below earlier in December, due to the holidays). Our overall inventory level is still relatively high, based on industry standards. But we have various customers locked-up on blanket orders, and it was our goal to keep steel in the pipeline for key customers through 4Q and into Q1. We expect the market to strengthen further from here and will be very happy we have the inventory we do if the market does heat up a little. Our main customers are forecasting strong demand into the first half.” 

“We have about seven weeks of supply right now, which is reflective of our anticipated shipments this month and next. December was actually a decent month (November was down), and we are taking in quite a bit of steel in January ahead of the price increase.”

“While total weight of inventory is back in line with where we’d like to be, the rolling three-month average for orders is way below last year and looks like it will be staying lower for the coming first quarter. Most of our end users are claiming that they have too much inventory on hand as they bought ahead of the import changes they were anticipating for 2018 with a fear of shortages that the domestic mills normally use when imports are restricted. The trend is to carry a bit more inventory to handle any shortages that may happen within the distribution chain. Personally, I feel there is too much inventory available, and by the time imports may affect it, they will be rolling in again as usual. December was a short shipping month due to the holidays and a scheduled shutdown for maintenance. Inbound inventory was controlled to compensate for this.”

“We’re at 3.84 months. Our inventory build will soon be complete. December shipments were pretty weak, but we expect things to pick up in Q1.”

“We built up our inventory a little going into year end, ending at about 3.5 months’ supply, partially to get ahead on filling upcoming contracts and also in anticipation of a pickup in pricing and interest in the New Year.”

“We’re at 2.54 months based on December sales, which are always at the lowest level of the year. We did increase inventories modestly vs. November due to rising price trends, but still ended up at our lowest level ever for a December. We were at a historically low level in November.”

All data providers are flat rolled steel service centers located in the United States. We are also gathering information from plate distributors, but we are not yet ready to provide a separate index on plate as we need to add more distributors to our list of data providers.

The information collected is confidential, including the name of the participating service centers. In some cases, Steel Market Update has signed confidentiality agreements. We are looking for more steel distributors who carry either prime flat rolled or plate steels to become data providers. You can become a data provider by contacting John Packard at John@SteelMarketUpdate.com.

We produce two reports from the data collected: a “Flash Report” and the full report. The Flash Report is produced within a few days of the last day of the month based on information supplied by approximately 50 percent of the data providers. The Flash Report is provided to the service centers who provide inventory information to Steel Market Update. We then produce our full report, which we try to complete on or about the 14th day of the new month.

Our report has nothing to do with the Metals Service Center Institute (MSCI), which produces their own inventories and shipment report around the middle of the month.