Distributors taking inventory seriously

Aug 28, 2012 | 07:00 PM | AMM staff

Tags  U.S. steel distributors, Canadian steel distributors, U.S. aluminum distributors, Canadian aluminum distributors, inventory controls, Institute for Supply Management, Steel Buyers Forum,

The summer of 2012 might be long and hot, but inventories at service centers have been short and cold. With the economic recovery continuing to move forward sporadically, service centers’ outlook on profitability has a great deal to do with implementing efficiency improvements. As the year reached its halfway point, it became clear that steel buyers have been somewhat divided over where the overall economy is heading, the direction of steel production and the strategies needed to meet the demands of a volatile market.

“Without automotive, I don’t know if we’d be in business,” a source at a Great Lakes sheet distributor said in mid-July. “July is shaping up decently, but how long will automotive strength last?”

Buyers remained optimistic yet cautious amid relatively strong demand, but uncertainty clouds the market and they are sure of just one thing: with steel prices volatile this summer, no one plans to increase inventories dramatically anytime soon. Controlling inventory is one of the few variables in the market that is solely at distributors’ own discretion.

According to data from the Institute for Supply Management (ISM), 50 percent of Steel Buyers Forum members surveyed in June planned to reduce inventories in the second half of 2012, up from 31 percent in May even though incoming orders and backlogs showed little change month on month and shipments either held steady or improved for 75 percent of buyers.

Meanwhile, more than 33 percent of June’s survey respondents deemed their inventory levels too high for demand, up slightly from 31 percent in May. At the same time, one-quarter of buyers anticipated general economic activity stumbling during the next six months compared with a little more than 15 percent who made that prediction in May.....