American service center sources debated the future health of
the aluminum market amid news that U.S. aluminum shipments and
inventories dipped in May compared with a year earlier.
Some sources expect
the second half of the year to be stronger, while others
believe that the market will continue to muddle along where it
is now. But some are concerned that continually weak shipment
data and increasingly stiff competition could signal that
manufacturing is in for a difficult year.
U.S. and Canadian
service centers saw aluminum shipments decline in May from the
same month last year, Metals Service Center Institute data
show, while inventories fell in the United States but rose in
U.S. service centers
shipped 132,400 tons of aluminum products last month, down 2.7
percent from 136,100 tons in May 2012, while inventories fell
4.6 percent to 368,000 tons (2.8 months supply at current
shipping rates) from 385,700 tons (2.8 months supply) in
the same comparison. Year-to-date shipments of 617,200 tons
were down 7.1 percent from 664,200 tons in the first five
months of last year.
centers shipped 14,500 tons of aluminum products in May, down
0.5 percent from 14,600 tons a year earlier, while inventories
increased 2.7 percent to 37,200 tons (2.6 months supply)
from 36,200 tons (2.5 months supply) in May 2012.
Shipments in the first five months of the year totaled 67,000
tons, off 4.1 percent from 69,800 tons a year ago.
attributed the Canadian declines to that countrys
increased focus on the energy market and its struggling
manufacturing sector. "Customers are uncertain about the long
term, so they are keeping orders as short and as light as
possible," one service center source said. "They are continuing
to order only what they need." He said his company had seen
growing competition not only from the firms it traditionally
battles for business but also from smaller distributors looking
to "flip" offshore material.
The growing number of
suppliers fighting for ever-fewer orders has pushed down
margins and prices and even brought mills into the fray as they
look to grab small-volume business traditionally left to
service centers, the source said, echoing a sentiment expressed
by other market players. "Everything is more aggressive and
more competitive, and you have to fight harder for
ordersbut thats what keeps you on your toes," he
July and August likely
will be difficult because of a normal seasonal slowdown in
activity, but business should rebound in September and October,
the service center source said, citing improving consumer
confidence and spending data. Such indicators generally improve
ahead of any uptick in manufacturing activity, he said, noting
that 2014 should see more robust activity as automakers roll
out more aluminum-intensive vehicles for the 2015 model
But a second service
center source said there is "a true sense of worry and concern
in the marketplace right now." While some economic indicators
may be pointing up, conversations with customers suggest that
"manufacturing is heading in another direction," he said.
"I am one of the
biggest glass-half-full people you will run into, but I just
dont see where the optimism is coming from," the second
service center source said, citing plate prices he
characterized as being "in the gutter" largely because of
A third service center
source brushed off the current dip in aluminum shipments,
predicting a strong second half and an even stronger 2014.
"Its like golf: You bring the club back and have a
momentary pause before you make a big swing," he said.
The third source
contended that a host of macroeconomic indicatorsfrom the
stock market and gross domestic product to unemployment and new
housing startspoint to better times ahead. "When things
are going south, there are indicators that we just dont
see on the horizon right now," he said. "Lead times are not
shrinking dramatically, and we are not seeing mills blow the
bottom out of the pricing structure."
The third service
center source also said that the internal indicators his
company uses to gauge business, such as activity at its call
centers, were largely positive. Call center inquiries and
orders have been up for the past three months, something that
historically has foreshadowed an increase in larger-volume
contract business, he said.
"Im digging a
hole for a swimming pool because its going to be a good
(second half)," he joked.