dominates the business of most service centers in North
America, a recent AMM survey of the top revenue
generators shows that many distributors are still buying,
fabricating and selling a diverse group of metals. Slightly
more than two-thirds of service centers polled this summer said
that stainless steel, aluminum, copper and brass accounted for
at least some of their business, while the remaining third
either did not respond to the question or dealt nearly
exclusively in steel products.
of both steel and aluminum rose in July, according to the
latest data from the Metals Service Center Institute
U.S. and Canadian
service center steel shipments of 3.92 million tons in July
were up 4.4 percent from 3.76 million tons in the same month
last year, putting year-to-date shipments at 27.95 million
tons, 4.1 percent below 29.15 million tons in the first seven
months of last year. Service centers continue to buy steel on
an as-needed basis due to squeezed margins and changes on the
supply side, and U.S. service center inventories of 7.84
million tons at the end of July (2.3 months supply at
then-current shipping levels) were 12.2 percent below 8.93
million tons (2.7 months supply) a year earlier, while
Canadian inventories fell 10.5 percent to 1.46 million tons
(3.2 months supply) from 1.63 million tons (3.5
months supply) in the same comparison.
One potential bright
spot is on the flat-rolled side, where market players said low
inventory levels and recent supply disruptions provided
stability and supported successful rounds of price hikes.
Morgan Stanley &
Co. LLC analysts seemed to agree, writing in a research note
that service center shipments highlight an unusual break
from normal seasonal patterns, which could indicate
strength in U.S. steel markets.
Others, however, warn
that the upward momentum could be short lived. When you
have a time of low inventory and belief that prices are
increasing, people are more comfortable to put orders into the
pipeline, a Midwest flat-rolled distributor source said.
With some shortage of tons, price increases are going to
happen. But once certain supply-side issues come back, the
bricks will come out of the foundation.
Competition at the
service center level also has been increasingly tough, causing
some to reconsider loading up on extra steel.
think the higher pricing is going to hold. Our books
arent really that strong, a second Midwest
flat-rolled distributor source said. Business has been
steady, but all new business today is coming from stealing
someone elses business. If I could, I would cut my
inventory levels by half because selling prices are getting so
Of those distributors
in the AMM survey who said that aluminum products were
part of their business, 69 percent said they accounted for less
than 15 percent of overall revenue, 14 percent said the metal
accounted for between 15 and 30 percent of their business and
17 percent said they accounted for more than 30 percent.
A service center
source cited a litany of problems he said were still dogging
the aluminum distribution sector and unlikely to be resolved in
the near term: the impact of budget sequestration in the United
States, low prices for aluminum on the London Metal Exchange,
and mills becoming more aggressive about taking end-user
business that traditionally has been handled through
Still, North American
service centers are hoping for better times in the second half
of 2013 and into 2014. U.S. and Canadian service center
aluminum shipments of 141,000 tons in July were up 5.1 percent
from 134,200 tons in the same month last year, putting
year-to-date shipments at 959,900 tons, 5 percent below 1.01
million tons in the first seven months of last year. U.S.
service center inventories of 367,400 tons at the end of July
(2.9 months supply) were 5.2 percent below 387,600 tons
(3.2 months supply) a year earlier, while Canadian
inventories fell 7.2 percent to 36,200 tons (2.9 months
supply) from 39,000 tons (3.1 months supply) in the same
glad the second quarter is behind us. While I dont have
great expectations for the third quarter, out of the gate
Im pleased, another service center source said.
Increased orders were coming in from a range of sectors,
including building and construction, aerospace and marine, he
said, but he questioned whether the uptick in demand seen by
his company was sustainable or a temporary blip.
Of those distributors
in the AMM survey who said that copper and brass were
part of their business, 97 percent said they accounted for less
than 15 percent of overall revenue, while 3 percent said the
metal accounted for between 15 and 30 percent of their
Copper and brass
service center sources said lead times remain short in the
United States due to slow spot business activity amid some
oversupply. Lead times from mills to service centers for
medium-gauge products remain at one to six weeks, while
light-gauge products such as copper sheet and coil have lead
times of between three and eight weeks.
In general, I
dont think lead times will lengthen, a service
center source said, adding that there was no good reason why
lead times were so short. Business has been slow,
Other sources blamed
the slowdown on summertime sluggishness as well as customer
speculation about where the market will stand.
Finally, of those distributors in the AMM
survey who said that stainless steel products were part of
their business, 76 percent said they accounted for less than 15
percent of overall revenue, 19 percent said the metal accounted
for between 15 and 30 percent of their business and 5 percent
said they accounted for more than 30 percent.