Business conditions and demand appear to be looking up for U.S.
and Canadian steel service centers, buy- and sell-side sources
said, but a number of market participants said winter weather
that has affected much of the United States has hurt shipping
levels and will likely continue to do so.
"The weather has
really crippled transportation. I cant get things out and
I cant get things in. Ive had to buy tons just to
fill in last week," one manufacturing source said. "Demand
wise, Im not hearing people talk about the sky falling. I
think well pull out of this, and everything Im
hearing on the end markets is that this year will be better and
that the second half will blow up."
winter conditions, January activity looked "decent," Morgan
Stanley & Co. LLC analyst Evan Kurtz said in a research
center data point to seasonally rebounding activity," he wrote,
noting that shipments rose strongly sequentially but were below
the seasonal average.
inventories are lower year on year, Kurtz said. "Results were
likely negatively impacted by extremely cold winter weather,
which could continue to depress shipments in February," he
Steel inventories held
by U.S. service centers increased 2.2 percent month on month to
8.55 million tons (2.3 months supply at current shipping
rates) in January, while Canadian steel inventories edged up
3.3 percent to 1.41 million tons (2.8 months supply) in
the same comparison, according to the latest Metals Service
Center Institute (MSCI).
By product group, U.S.
flat-rolled service center inventory volumes rose 5.4 percent
to 5.25 million tons (2.3 months supply), the highest
level since February 2013, with shipments rising 1.4 percent to
2.37 million tons from 1.93 million tons in December.
flat-rolled service center inventories rose 4.7 percent to
756,900 tons (3.2 months supply) in January vs. 722,700
tons the previous month. Shipment levels rose 3.6 percent to
258,400 tons from 182,400 tons in December.
flat-rolled service center source said there seemed to be a
year-on-year pickup in demand.
"Demand in the last
month and a half seems decent and a little better than last
year," he said. "I think this year is looking better overall.
Residential and nonresidential construction are picking up by a
few percent. Were just matching inventory to demand."
Meanwhile, U.S. steel
service center shipments as a whole jumped 23.7 percent to 3.65
million tons in January, and increased 42 percent in Canada to
Looking forward, some
sources said inventory levels will likely remain lean amid
concerns over raw material pricing.
"We believe absolutely
inventory levels will continue to be managed cautiously, given
ferrous scrap pricing softness emanating in February and likely
continuing into March," Philip Gibbs, an analyst at
Cleveland-based KeyBanc Capital Markets Inc., wrote in a
However, others were
more cautious, particularly as shorter lead times and global
overcapacity might affect business levels.
"On the pricing front,
weve seen slippage. Demand has been steady, but
theres global oversupply," a second Midwest service
center source said. "The only thing that will stop it is if
people start getting some confidence and go out there and buy