January Shipments and Supply of Steel Products

The supply/demand differential continued to shift in January as supply topped demand, lowering shipments and eroding pricing. Though both imports and exports rose in January, up 5.9% and 6.3% respectively versus December, domestic production was down nearly 11% over the period. Thus shipments (exports plus domestic production) during the month were down by 9.4% compared to December.

Domestic mill utilization averaged 82% through January, up fractionally versus December’s total, while mill lead times declined further, averaging about four weeks. Steel prices kept eroding throughout the month as supply outpaced demand.

SMU’s benchmark hot-rolled coil price fell by more than $200 per net ton in January to an average of $1,440 per ton FOB mill, east of the Rockies. The downtrend for HRC gained further momentum in February but may have bottomed out around $900 per ton at the beginning of March. Raw steel production shown below in Figure 1 is based on weekly data from the AISI displayed as four-week moving averages through Jan. 29, 2022.

Monthly shipment data for all rolled steel products is noted in Figure 2. The trajectories of the rebounds since Q2 2020 are comparable in Figures 1 and 2. Measured as a three-month moving average (3MMA) of the monthly data, January’s total was 8.448 million tons, down 1.8% compared to 8.604 million tons in December, and the third decline in four months. Despite the decrease, shipments were up 14.2% in January versus to the year prior when shipments were 7.399 million tons. The recovery from the COVID-related shutdowns nearly two years ago was meaningful, as current shipments are still up 2.8% and 0.6% versus the same pre-pandemic period in 2019 and 2020, respectively. 

Shipment and supply details for all product groups and individual sheet products are noted in Table 1, while domestic supply (shipments and imports) are shown in Table 2. Total supply (proxy for market demand) as a 3MMA was up 25% year over year in January, a big turnaround from the 14.9% decline the year prior as the market was still working its way out of the early pandemic-driven doldrums. Apparent supply is defined as domestic mill shipments to domestic locations plus imports. Mill shipments were up 14.2% in January, also a complete reversal from a decrease of 11.9% seen during the year-ago period in the same 3MMA comparison. The recovery has varied significantly among various products, but should remain up due to steady domestic output, especially if foreign material continues to make its way onto U.S. shores at the current or similar rate.

Overall sheet product shipments and supply continued to increase through January, though at a slower pace. Sheet supply rose by 15.6% and shipments by 5.5% in January, a strong recovery from declines of 7.6% and 6.1% seen one year ago. In the three months through January 2021, the average monthly supply of sheet and strip was 4.957 million tons, down from 5.022 million tons or 1.3% below the prior month. The average monthly supply of total rolled product was down 1.0% to 9.216 million tons versus December’s 9.311 million tons. Total sheet and strip apparent supply is up 11% year to date (Table 2) compared to 2021, while total rolled product apparent supply is up 14.2% over the same period. Note that year-over-year comparisons have seasonality removed.

The supply picture for HRC, CRC and HDG since August 2008 as three-month moving averages versus the long-term comparison between flat and long products is shown side-by-side in Figure 3. On the left chart, all three sheet products are displayed and have experienced some improvement since mid-2020, but galvanized (hot dipped and electrolytic) has seen the strongest rebound, a 53% jump since reaching bottom in June 2020, yet down 1.8% month on month in January. When compared to the same pre-pandemic period in 2020, the supplies of hot rolled coil and galvanized (hot dipped and electrolytic) are presently higher at 0.1% and 9.4%, respectively. Cold rolled is down 2.2% from the same pre-pandemic period in 2020. In the right chart, note that these are monthly numbers (not 3MMAs), which show the trend difference between longs and flat products including plate.

By David Schollaert, David@SteelMarketUpdate.com