December service center inventories and shipments both had disappointing news, as total inventories rose 4.7% - with an 8.1% jump in tonnage of flat-rolled, 4.9% for structural, 3.5% for plate and 9.0% for stainless. These increases were somewhat offset by a decline of 3.6% in pipe and tubing inventories and a less than 1% drop in bars. Months’ supply increased to 2.7 months’ on hand from 2.5 months’ in November, which is still low relative to the 10-year average of 3.3 months’ for December. After adjusting for three additional shipping days in December, months’ supply actually rose even further from November to 3.2 months’ on hand.
Average daily shipments fell 16.7% in December, which is only a slightly greater fall than typical for December’s seasonal decline in shipments of around 14%. Average daily shipments were down 5.5% year-over-year, which is somewhat encouraging as it was by far the smallest year-over-year decline of 2009.
We’re somewhat troubled by the uptick in inventory levels, particularly for flat-rolled. However, inventory levels are still low by historical standards and we expect to see rising shipments in the near term as we move past the seasonal weakness, which should keep the months’ supply in check.
MSCI December inventories increased 4.7% to 6.14 million tons (mt) from 5.86 mt in November. Months’ supply rose from 2.5 months’ on hand to 2.7 months’ due to a drop in shipments, which was offset by three additional shipping days in the month. Adjusting for number of days in December magnified the increase, raising the adjusted months’ supply to 3.2 months’ on hand. Average daily shipments fell 16.7%, only slightly more than the average of 14.2% for the November-to-December time frame.
On a sequential basis, flat-rolled inventories jumped 8.1% to 3.5 mt with average daily shipments falling 20.5%. Bar inventories remained relatively flat at 0.6 mt while average daily shipments dropped 14.3%. Plate inventories climbed 3.5% while average daily shipments fell 3.7%. Structural product inventories increased 4.9% as average daily shipments declined 6.9%. Stainless inventories jumped 9.0% while average daily shipments fell 18.5%.
Pipe and tubing showed the only positive sign, with inventories falling 3.6% in December. However, adjusting for the additional shipping days caused months’ supply to increase from 3.3 to 3.6 months.