NEW YORK Buying remains on an as-needed basis for U.S. and Canadian steel service centers, buyer sources said, noting that imports remain a concern.
Increasing volumes of imports have hit U.S. shores and will continue to arrive through spring, which likely will boost inventory levels, others said.
Typically, in the first quarter you have an uptick in business. ... But buying remains close to the vest. I dont think its going to last, either. On top of that, youve got all those imports coming in, and mills have open capacity, a Midwest flat-rolled service center source said.
Our business has been great, but were fighting every day for customers a Northeast flat-rolled service center source said. For us, our inventory hasnt changed. I think that inventories across the board have to be up because we had a couple of months of horrible shipments. But when all is said and done, no one is buying more steel than they need to; who wants to take a chance?
Steel inventories held by U.S. service centers inched up to nearly 8.58 million tons (2.5 months supply at current shipping rates) in February, 0.3 percent ahead of 8.55 million tons (2.3 months supply) the previous month and 0.8 percent higher than 8.51 million tons (2.5 months supply) a year earlier, according to the latest Metals Service Center Institute (MSCI) data. Canadian steel service centers inventories of nearly 1.4 million tons (3.1 months supply) last month were down 1.1 percent from 1.41 million tons (2.8 months supply) in January and 21.2 percent from 1.77 million ton (3.8 months supply) February last year.
But inventory levels look uncertain in the coming months, some sources said.
Given the deflationary steel pricing environment and a more modest growth trajectory in shipments, we believe it is likely steel inventories may move slightly lower near term (with import volumes the key unknown variable), Luke A. Folta, a New York-based equities analyst at Jefferies & Co., said in a research note. Should the magnitude of import volumes arriving in the late (first quarter) and (second quarter) exceed expectations, inventories could continue to increase should demand not keep pace.
U.S. steel centers shipments totaled 3.38 million tons in February, down 7.4 percent from 3.65 million tons the previous month but up 0.4 percent from 3.37 million tons a year earlier, according to MSCI data. Canadian shipments fell 9.4 percent to 448,500 tons from 495,300 tons in January and were 3.2 percent lower than 463,100 tons in February last year.
The declines could be due to the severe winter weather that swept across much of the United States, sources said, but with business conditions positive, the numbers in February look promising.
February service center data continues to confirm seasonally rebounding activity, possibly hampered by weather, Evan L. Kurtz, an analyst at Morgan Stanley Research, New York, said in a note.