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Aluminum shipments spark cautious tone

Keywords: Tags  Metals Service Center Institute, MSCI, July shipments, inventories, aluminum, Michael Cowden

CHICAGO — Positive aluminum shipment data in July has given confidence to North American service centers hoping for a strong finish to the year, although slow activity so far this month has some worrying whether predictions for a better second half remain on good foundations.

July was the first month this year that aluminum shipments by U.S. service centers were above the corresponding month in 2012, according to data from the Metals Service Center Institute (MSCI) released Aug. 15.

U.S. service centers shipped 128,600 tons of aluminum products in July, up 5.7 percent from 121,700 tons a year earlier, and inventories fell 5.2 percent to 367,400 tons (2.9 months’ supply at current shipping rates) from 387,600 tons (3.2 months’ supply) in the same comparison. Year-to-date shipments of 867,600 tons remained 5.2 percent below 914,700 tons in the first seven months of last year.

Canadian service centers shipped 12,400 tons of aluminum products in July, down 0.8 percent from 12,500 tons a year earlier, while inventories tumbled 7.2 percent to 36,200 tons (2.9 months’ supply) from 39,000 tons (3.1 months’ supply). Year-to-date shipments totaled 92,300 tons, down 3.7 percent from 95,800 tons a year earlier.

Among tailwinds for the second half of 2013 is more interest than usual from buyers looking to sign long-term contracts to lock in historically low metal prices, one service center source said. "Everything is vectoring in the right direction, although the speed is maybe not what some people had expected," he said, predicting that business would continue to gradually improve month over month but questioning forecasts about 2013 being better than last year.

Service centers cited strength in end markets as diverse as automotive, marine and semiconductors. Some fretted that an inventory overhang in heat-treat plate for the aerospace market could drag into 2014, longer than previously expected, but overall sentiment remained cautiously optimistic, even in aerospace.

"Our numbers outpaced MSCI for July ... and it’s across the board," a second service center source said, predicting 2013 would be a "completely different go-round" from last year. Whereas 2012 saw a strong first quarter and weaker subsequent quarters, this year could see the opposite situation, he said.

But it’s not a slam dunk, he said, citing uncertainty over Midwest aluminum premiums that may make some customers think twice before making buys. More worrisome is that daily shipment data for August has lagged July results, he said, speculating that July may have benefited from buyer expectations that metal prices would firm in August.

"August is a sounding board to see whether we’ll have a pickup in September that leads to a better second half, so a lot of eyes are watching (August shipments)," he said.

But market sources also were quick to note that August often picks up later than other months because of summer holidays. And the move can be fast when it does pick up, as companies look to restock in anticipation of activity ramping up in September, they said.

A third service center source agreed that August has proven to be eerily quiet thus far. "The last few years August has been good, but so far it’s not tracking very well," he said.

Also disconcerting is continued "hand-to-mouth" buying on the part of customers, he said, noting that his firm has been visiting with clients and asking them about their budgets and outlooks for 2014. "The response has been ‘no clue.’ It’s not that they don’t have a clear picture—they don’t even have a fuzzy picture," he said.

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