Complementing the data pulled from our MSCI analysis are the results we
have gathered through the twice-monthly surveys we conduct throughout the
year. One of the inquiries posed to service centers is if their inventories are balanced or if they need to either build or lower inventory levels.
In the survey conducted the week of Aug. 14, service centers reported inventories that were balanced or higher than what they considered comfortable.
Only 6 percent of distributor respondents reported inventories too low and in
need of replenishment (see Figure 2).
So SMU’s data suggests that the mills will be hard-pressed to collect the price
increases announced in mid-August.
There is a possible black swan event that could change inventory flows dramatically and play with our model. That would be the flow of foreign steel. Due
to threats of the Section 232 investigation, the amount of foreign steel being
imported has increased as buyers look to beat any punitive action by the Trump
It’s possible foreign steel flows could drop dramatically in September, October, and November of this year. During our survey process, trading companies
were unanimous in their opinion that imports of cold-rolled, galvanized, and
Galvalume steels will slow in the coming months.
Steel buyers need to remain vigilant to any changes in flows of steel, both
domestically and internationally, as interruptions in the norm could have a dramatic impact on steel prices going forward.
John Packard, founder of the Steel Market Update,
can be reached at firstname.lastname@example.org.
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