Steel Product Shipments and Inventories Through February

Steel product shipments rose from 5.0% growth in January to 5.5% growth in February, year on year. Figure 1 and Figure 2 show the history of both since 2005. During the first wave of the global pandemic last April, total manufacturing shipments plunged by 19.4% and steel product shipments fell by 21.4% compared with the prior year. Both have steadily recovered since, driving optimism for 2021.

Monthly steel product shipments in millions of dollars with the year-over-year growth through February are detailed in Figure 2. Shipments of steel products totaled $10.512 billion in February, up from year-ago levels when shipments were $9.965 billion. Shipments of steel products most recently peaked in November 2018 at $11.2 billion, then began a 17-month decline through April 2020. Although the growth rate has declined from 18.6% in August 2018 to just 5.5% through February 2021, shipments of steel products are up 26.9% since reaching bottom last April.

The Census data in Figure 2 compares well over the long term with the American Iron and Steel Institute weekly crude steel production shown in Figure 3. Figure 2 is in dollars and Figure 3 is in tons, yet they paint a similar picture. Since the freefall from the first wave of the pandemic that came to an end in late May 2020, steel production has been on the rebound, according to AISI data shown on a four-week moving average basis. Crude steel production was up 23.0% in the week ending April 17 year over year.

Steel product shipments and new orders on a monthly basis since 2010 are shown in Figure 4. New orders declined much more than shipments last April, but were back in balance by June and have now exceeded shipments. There was a slight curtailment in new orders and shipments in February as inventories are tight and lead times continue to extend. Despite the recent slip, the uptrend and tighter gap between new orders and shipments reflects the continued growth in steel demand. 

The same total shipment line as in Figure 2 is shown below in Figure 5, but now includes the inventory-to-shipment (IS) ratio. The IS ratio is a measure of how much inventory is necessary to support the level of shipments, thus the lower the IS ratio the better. The IS ratio shot up in April 2020 to 2.34% as shipments declined due to shutdowns to stop the spread of COVID-19. Through February, the IS ratio was at 1.79%, up from 1.74% the month prior, as shipments have increased greater than inventories due to the tight availability of steel on the spot market. Overall, shipments have improved by nearly 27.8% since May 2020. Total inventory in millions of dollars is displayed in Figure 6 and repeats the inventory-to-shipment ratio shown in Figure 5.

By David Schollaert, David@SteelMarketUpdate.com