The combination of average inventories at just below three months, and service centers reporting balanced or higher than needed inventory levels, is not a good sign for the collection of higher spot steel prices right now. This is yet another reason why our SMU Price Momentum Indicator remains at Neutral. We will continue to watch momentum closely as we conduct our mid-September flat rolled steel market trends analysis during the course of the coming week.
What Our Inventory Data Respondents Told Us
When we probed for the reasons behind the data collected, we heard “preparation for Section 232,” as well as “a good buy,” as the main reasons for those who increased their inventories. Here are a few of the responses received as we collected the data on Thursday and Friday of last week:
· “On flat-rolled only, we are at four months right now. Definitely a little heavier than usual. We did buy a little extra as 232 fears hit.”
· “Unfortunately, I think September will be higher. We have some large customers doing some ‘rationalization’ for their finished goods, and we’re seeing lower volumes. I think that’s likely unique to us vs. the market trend, from what I’m hearing otherwise around the horn.”
· “[Higher inventory caused by] a nice buy that came in.”
· “We had two months of inventory on hand, primarily due to all the imports landing early to beat the supposed 232 situation. As we head into the end of the year, we will migrate down to 1.25-1.5 months for buying opportunities at year end. We like to stay around 1.5-1.75 months of supply.”