CHICAGO Aluminum product shipments from service centers in the United States and Canada fell in February compared to the same month last year, leaving market participants debating whether the pullback represents a short-term blip or something more.
U.S. service centers shipped 114,300 tons of aluminum products last month, down 9.4 percent from the 126,100 tons shipped in January and off 12.1 percent from the 130,000 tons shipped in February 2012, according to Metals Service Center Institute (MSCI) data. The U.S. industry has shipped 240,400 tons of aluminum in the first two months of 2013, off 8.8 percent compared with the same period last year.
Domestic inventories, meanwhile, slipped to 363,100 tons, or 3.2 months supply at current shipping rates, vs. 366,400 tons (2.9 months supply) in January and 374,700 tons (2.9 months supply) in February 2012.
Canadian distributors shipped 11,900 tons of aluminum products in February, down 12.5 percent from the 13,600 tons shipped in January and off 11.9 percent compared with the 13,500 tons shipped in February 2012. Inventories in Canada at the end of last month totaled 38,200 tons (3.2 months supply), down 6.1 percent from 40,700 tons (3 months supply) in January but up 9.8 percent from 34,800 tons (2.6 months supply) in February 2012, the data show.
Market sources generally agreed that the decline in total inventories resulted from a combination of continued conservative buying patterns and a push by the industry to reduce inventories and turn them as often as possible, particularly given continued uncertainty in Washington.
Everyone is holding their breath to see what is going to happen with the markets and sequestration, one aluminum distributor said.
A second distributor said his firm is seeing a mixed bag of business depending on the sector. The leading indicator is that the order receipts are down and inventories are trailing, so clearly there is a correction taking place, he said.
The secondary distribution business, for example, has gotten flat to soft, the second source said. People are buying what they need. No one is buying against a potential price increase or shortage, he said.
But any inventory correction is likely a short-term one, especially with strong demand from such sectors as commercial and private aerospace, areas in which business is expected to continue to be solid through 2014 and beyond, the second distributor said. Chemical, petrochemical and value-added fabrication markets are also doing well, he said.
While the market may be experiencing a momentary pause and may not surge back as quickly as previously expected in 2013, the year should still see a steady uptick in business, the second distributor predicted, ticking off other positive factors, such as customers paying on time more often in 2013 than in recent years.
Additionally, the impact of sequestration should not be overstated, the second distributor said. Even with sequestration ... this market compared to what it was 12 to 15 years ago is way better, he said, contending that some companies may be looking to see a return to business levels experienced in the lead-up to and during the height of the wars in Afghanistan and Iraq.
That wasnt sustainable, and you cant compare anything to that (period). Thats like comparing a cage match to boxing, the second distributor said.