CHICAGO Steel service centers are sitting out of the market amid concerns about building inventories as business remains slack after registering mixed shipping results in March.
U.S. and Canadian steel service center shipments totaled a combined 3.9 million tons in March, up 1.8 percent from 3.83 million tons the previous month but 10.9 percent below nearly 4.38 million tons in March 2012, according to Metals Service Center Institute (MSCI) data.
"Its very quiet out there. People are afraid to take positions on inventory. ... When business was at least halfway decent, customers bought for this month and next. Now they are just buying for this month or on a weekly basis," a source at a Great Lakes flat-rolled distributor said. "(Our company is) not afraid to take a position, but we are very selective on what were purchasing. Material we bought three to four months ago, were not buying that now."
Steel demand is increasing, but only slowly, the chief executive officer of a major North American sheet processor said. "You dont have to buy much steel. Given the short lead times, you dont need your inventory to be longer than mill delivery: four to six weeks and, in some cases, two weeks."
Taking a longer view, a Midwest service center executive is concerned that "we are a third of the way through a lost decade."
There are two ways to exit a recession: by consumer spending or exports, he said. But real unemployment is too high and wages are declining, which means "American consumers have no cash flow. ... Plus, there is this sequestration. No one likes uncertainty, so they batten down the hatches. They are not buying a car, a refrigerator or taking a vacation. The government is creating uncertainty and retarding consumer-based growth."
Businesses as well as local and state governments are making do with the assets they have and are delaying buys, he said. Meanwhile, "steel pricing is doing nothing. The end of the year will be near where we started the year, but there are theatrics in the meantime, all for naught."
"We need mills to have a (price) increase and have it stick," the Great Lakes distributor source said. "Service centers dont want to pay X amount and then see prices drop. Margins are so thin already."
U.S. service center steel shipments totaled 3.43 million tons in March, up 1.8 percent from 3.37 million tons the previous month, but average daily shipments fell 3.1 percent to 163,200 tons because March had one more shipping day than February. First-quarter shipments totaled 10.44 million tons, down 6.6 percent from 11.18 million tons a year earlier.
U.S. distributors inventories totaled 8.49 million tons at the end of March, down 0.2 percent from 8.51 million tons a month earlier.
Canadian service center steel shipments totaled 472,200 tons last month, up 2 percent from 463,100 tons in February, but average daily shipments fell 3 percent to 22,500 tons. First-quarter shipments plunged 13.1 percent to under 1.46 million tons from 1.68 million tons a year earlier. Canadian inventories fell 2.2 percent to 1.73 million tons from 1.77 million tons at the end of February.