Flat Rolled & Plate Inventories Dropped in June

The latest Steel Market Update Inventory Survey shows U.S. service centers continue to pare down their inventories. In June, the number of shipping days of supply for sheet fell to the lowest level seen since February, and for plate, it was the lowest level seen all year.

Flat Roll inventories at 50.9 days

At the end of June, U.S. service centers reported a 1 percent drop in inventories with less than a 2 percent decrease in shipments month on month. The result was an apparent flat month-on-month calculation of 2.55 months of supply in June.

However, months of supply on hand does not tell the full story because June had 20 shipping days, compared to May’s and April’s respective 22. If you just look at the months of supply, it appears that months of supply has held flat around 2.5 for the last three months (2.54 in April; 2.53 in May; and 2.55 in June). When you consider the number of days, you see that shipping days of supply fell to 50.9 in June from May’s 55.6 and April’s 55.9.

Similarly, the shipping days of supply on order clearly shows an uptick in purchasing. Service centers had 33.4 days of supply on order at the end of June, up from 30.5 in May. The percentage of inventory on order jumped to 66 percent in June from 55 percent.

The amount of sheet inventory committed to contracts also increased to 58 percent from 47 percent, which is indicative of either service center customers or the service centers themselves looking to lock in lower prices when prices were bottoming.

Looking ahead, we expect that the amount of flat rolled steel on order will remain elevated, given the high-volume orders placed in late June and early July, as prices were finding a bottom. This will reduce the amount of material that will be purchased at higher prices. We expect inventories to remain elevated in July and outbound shipments to decrease because of seasonal factors; however, this could be offset by additional shipments at lower prices earlier in the month.

Plate Inventories stand at 56.4 days

U.S. service center inventories for plate in June shrank by 8 percent while shipments decreased 9 percent month on month.

Shipping days of supply dropped to 56.4 days from 61.4 in May; 56.4 is the lowest level recorded this year.

Service centers carried 2.82 months of supply for plate in June, up from 2.79 in May.

The amount of inventory on order has been relatively steady at 40 percent in June and 39 percent in May. This translates to 22.6 shipping days of supply, a new low for the year and down from 23.8 in May.

The amount of plate inventory committed to contracts was flat at 40 percent in June.

As plate prices have been tumbling, buyers have shunned new orders. The lessening supply on order – at 22.6 days in June – will translate to lighter inventories, which could support possible price increases.