CHICAGO U.S. service centers last month recorded their strongest aluminum shipments since May last year, boosting expectations for 2014 even as some market sources questioned the sustainability of the demand uptick.
Improved activity was reported in markets as diverse as aerospace, automotive and commercial construction and in products ranging from extrusions to sheet and plate and bar and tube.
"If you would have asked me four months ago, I would have said I was disappointed with 2013. ... But its turning out to be the opposite of 2012," one service center source said. Demand in 2012 was strong at the beginning of the year but slowed in the second half, while 2013 has seen the trend reverse, he said, echoing the sentiment of others.
U.S. service centers aluminum shipments totaled 135,800 tons in October, up 11.6 percent from 121,700 tons the previous month and 8.7 percent ahead of 125,000 tons a year earlier, according to the latest Metals Service Center Institute data. Despite those gains, year-to-date shipments of nearly 1.26 million tons were down 2.2 percent from 1.29 million tons in the first 10 months of last year.
Inventories totaled 368,900 tonnes (2.7 months supply at current shipping rates) at the end of October, up 1.7 percent from 362,700 tons (3.0 months supply) the previous month but down 0.8 percent from 371,800 tonnes (3.0 months supply) a year ago.
Canadian service centers shipped 14,100 tons of aluminum products in October, up 13.7 percent from 12,400 tons the previous month and 0.5 percent higher than 14,000 tons a year earlier, but year-to-date shipments of 131,500 tons were down 3 percent from 135,500 tons in the same period last year. Canadian inventories were pegged at 34,500 tons (2.5 months supply) at the end of October, down 1.4 percent from 35,000 tons (2.8 months supply) a month earlier and 12.8 percent below 39,600 tons (2.8 months supply) a year ago.
The service center source said his company has seen shipments rise due to demand from an improving commercial construction market, especially in the southern United States. He chalked up the improvement to increased bank lending allowing long-deferred projects to move ahead.
"Im optimistic for 2014. ... This is sustainable as long as Congress doesnt create another budgetary crisis," he said. While he predicted continued strong demand, he warned that metal prices could erode further, given high warehouse stocks.
A second service center source said his company saw improved demand in October due to a flurry of activity from government-related business that was largely unaffected by the short government shutdown because much of it was mission critical. "No one is going to drive an unsafe tank," he said.
He said his company also was seeing improved demand from the aerospace sector due to increasing build rates and record backlogs at commercial aircraft manufacturers. He did not dispute mill comments about an inventory overhang dragging into 2015 (amm.com, Oct. 9), but he said his company generally supplies productssuch as aluminum plate and tubingto fabricators who then pass the material further downstream. "No one takes something from us and puts it into a cockpit. It might go into a system that raises and lowers a landing gear. But it goes through four or five hands first and might take six to 18 months," he said.
A third service center source said his company had recorded a "solid" October for extrusions as well as rod and bar. He said it was unclear what exactly was driving demand but speculated that increased aluminum use in the automotive sector might be helping. "Youve got 8- and 9-speed transmissions now. Thats a lot of parts, and it can add up to pounds quickly," he said.
But he was unsure whether overall demand was growing or whether his company was gaining business at the expense of competitors by being more aggressive. If the latter is the case, he questioned whether shipments would continue to improve in a U.S. economy still dogged by political brinkmanship and economic uncertainty.