CHICAGO North American service centers aluminum shipments slipped in February as severe weather slowed production and snarled transportation in much of the United States and Canada.
But while most market sources contacted by AMM remain bullish about 2014, especially as temperatures rise, some said they are increasingly concerned about fallout from Russias involvement in Ukraine and potential disruptions to the aluminum market.
Our business was definitely impacted by weather in February, one service center source said. Commercial and residential construction came to a standstill. But orders have rebounded in March across the board, he said, noting that his company is upbeat on 2014.
That sentiment was shared by others, who noted stronger March orders across a variety of products and markets.
February was actually not a bad month aside from the weather-related issuesnothing stellar in terms of our forecasts, but we didnt lose ground, either, a second service center source said.
February business was bolstered by strong aluminum plate shipments to the aerospace sector, the second source said, but added that he wasnt sure if the increased activity reflected stronger demand overall or market share gains by his company or its customers. Other markets and products roughly met expectations, he said.
Despite troublesome weather, February was profitable and the coming months should be even more so, given strong forward bookings, a third service center source said, in contrast to March last year, when his company realized that its forecasts were too optimistic and that a mild winter had pulled business activity forwardthe opposite of what has happened thus far in 2014.
In addition to improved end-use demand, smaller service centers might be carrying less inventory than they have in the past, something that also could be boosting demand for bigger competitors, he said.
However, like other sources he ticked off a list of concerns: a high Midwest premium potentially attracting imports and increased price volatility, tensions with Russia escalating to the point where aluminum flows from the nation to London Metal Exchange warehouses in Europe could be disrupted, andin an unlikely worst-case scenarioexpected defense spending being reallocated or given priority over other sectors orders.
You cant just ignore whats going on in Crimea, the third source said. Were generally positive about 2014. But Russia is a huge wild card right now, and at the moment things are not heading in the right direction.
The second source also is keeping his eye on developments in Ukraine. There is already concern over the availability of 6061 and 7075 plate, as well as large-diameter 6061 rod, he said. The Russians are pretty much the only viable source for this product.
U.S. service centers aluminum shipments totaled 124,500 tons in February, down 7.3 percent from 134,300 tons in January but up 8.9 percent from 114,300 tons a year earlier, according to the latest Metals Service Center Institute (MSCI) data. Canadian shipments of 12,000 tons in February were down 12.4 percent from 13,700 tons in January but up 0.3 percent from 11,900 tons in February 2013.
U.S. centers inventories totaled 377,800 tons (3.0 months supply at current shipping rates) at the end of February, down 1.2 percent from 382,300 tons (2.8 months supply) a month earlier but up 4 percent from 363,100 tons (3.2 months supply) in February last year. Canadian stocks of 39,300 tons (3.3 months supply) in February were up 4 percent from 37,800 tons (2.8 months supply) in January and 3 percent from 38,200 tons (3.2 months supply) a year earlier.