Shipments and Supply of Sheet, Longs Through June

Figure 1 shows that the robust growth of U.S. raw steel production that occurred last year has reversed in 2019 but is still positive 1.3 percent year over year through Aug. 17. This is a four-week moving average and is based on weekly data from the AISI.

This shipments and supply report is based on monthly shipments by product as reported by the AISI plus import and export data from the Department of Commerce. Figure 2 shows the monthly shipment data for all rolled steel products. In the long run, the trajectories of growth in Figures 1 and 2 are basically the same.

First, though, we will look at the shipment and supply situation for all product groups to see how much difference there is between them. Table 1 is this compilation. Total supply (proxy for market demand) as a three-month moving average (3MMA) was down by 1.2 percent year over year and mill shipments were up by 2.4 percent, meaning that imports took a smaller slice of the pie in the three months through June year over year. There is a big difference between products. Sheet products had a year-over-year decline in both shipments and supply. Long products had double-digit growth in both shipments and supply, and tubular goods was mixed with supply down and shipments up. The domestic plate market had a small decline in both supply and mill shipments.  

Looking at sheet products in detail, one consideration is seasonality of demand, which is significant with a 10-year historical average that varies by 11.4 percent between the high month of August and the low month of November. Over this 10-year period, May, June and July have been very consistent as shown in Figure 3, but this was not the case this year when June was down 3.0 percent from May.

Table 2 describes both apparent supply and mill shipments of sheet products (shipments includes exports) side by side as three-month averages through June with year over year growth rates for each. Comparing the year-over-year time periods, total supply of sheet products to the market decreased by 6.9 percent and mill shipments decreased by 4.3 percent. Table 2 breaks down the total into product detail and shows that supply was down for all five sheet products considered in this report. Cold rolled and electrogalvanized continued to be particularly weak. Domestic mill shipments were down year over year for all products except other metallic coated, which is mainly Galvalume. Apparent supply is defined as domestic mill shipments to domestic locations plus imports. In the three months through June 2019, the average monthly supply of sheet and strip was 4.683 million tons. There is no seasonal manipulation of any of these numbers. By definition, year over year comparisons have seasonality removed.

Figure 4 shows the long-term supply picture for the three major sheet and strip products, HRC, CRC and HDG, since January 2003 as three-month moving averages.

Table 3 shows that total supply of sheet and strip products including hot rolled, cold rolled and all coated products decreased by 6.1 percent year-to-date and increased by 1.9 percent comparing three months through June with three months through March. This latter increase is a seasonal effect as shown in Figure 3.

The dramatic difference between long and sheet products is shown in a comparison between Table 2 and Table 4. Long products are driven more by construction and less by manufacturing, Sheet products have the reverse drivers. Figure 4 shows the same result on a graphical basis.

SMU Comment: Longs are experiencing very strong demand and mill shipments, driven by the booming construction industry. Sheet product demand is being adversely affected by the weakness of manufacturing industries. Since last November, the long product mills have had higher capacity utilization than the flat rolled mills for the first time since October 2012.