Inventories of steel and aluminum products at North American metals service centers continued to decline in July, as continuing year-over-year shipment declines for both metals underscored ongoing destocking in both the U.S. and Canada.

North American metals service centers report that their inventories of steel and aluminum declined in July, according to a report released this week. Based on data collected from metals service centers in the United States and Canada, the Metals Service Center Institute’s (MSCI) Metals Activity Report shows that continuing year-over-year shipment declines for both metals underscored ongoing destocking in both the U.S. and Canada.

“Analysts are surprised to see that further destocking occurred through the month of July because their assumption that prevailing steel mill list price increases had suggested that strong shipments and inventory reduction efforts were in place,” according to Tom Stundza, Purchasing.com‘s chief industrial commodities analyst.

“Some now admit they were wrong since buyers are purchasing steel hand-to-mouth, meaning the buys are being balanced against orders,” Stundza writes.

U.S. service centers’ shipments of steel products totaled 2.5 million tons last month, or 39.4 percent less than in July 2008. Since the start of 2009, through July, U.S. service center steel shipments totaled nearly 17.3 million tons, a 43.3 percent decline from the same seven-month period in 2008. In its latest findings, the World Steel Association (worldsteel) reports that the U.S. produced 5 million metric tons of crude steel in July, 41.6 percent less than the same month last year.

The American Iron and Steel Institute’s latest month-to-month comparison of shipments shows the following changes: hot dipped galvanized sheet and strip, up 27 percent; hot rolled sheet, up 23 percent; and cold rolled sheet, up 15 percent.

Canadian metal centers shipped 398,500 tons of steel in July, or 23.8 percent fewer tons than in July 2008, according to the MSCI. For the first seven months of the year, Canadian steel shipments amounted to about 2.9 million tons, 33.7 percent below shipments in July 2008.

Last month, worldsteel reported that North America’s steel production had plunged by 48.5 percent in the first half of this year.

The MSCI reports that U.S. centers’ steel inventories totaled 5.7 million tons at the end of last month, 47.7 percent less than at the end of July 2008 and indicating a 2.3-month supply at the current shipping rate. At the end of last month, Canadian inventories were at 999,000 tons, down 35.4 percent from last year and equal to a 2.5-month supply at current shipping rates.

Meanwhile, shipments of aluminum products from U.S. metals service centers totaled 89,700 tons last month, a 39 percent decline from a year ago, and Canadian service centers’ aluminum products shipments in July totaled 9,700 tons, 20.8 percent less than in July 2008.

“The widely reported slippage in aluminum demand — down by better than 30 percent on an annualized basis — caused U.S. and Canadian shipments to slide 1.5 percent in July to 99,400 tons, the fourth month this year shipments have been under 100,000 tons,” Purchasing.com’s Stundza writes.

For the first seven months of 2009, U.S. metal centers shipped 614,200 tons of aluminum products, a 42.6 percent decline from the same period last year. Aluminum inventories at the end of July totaled 266,500 tons, or 42.5 percent below July 2008 inventories. At current shipping rates, U.S. aluminum stocks were equal to about a three-month supply.

Canadian service centers shipped 74,900 tons of the metal during the first seven months of 2009, down 25.7 percent from a year ago. Month-end inventories totaled 30,600 tons of aluminum, equal to a 3.1-month supply.

Data from the Aluminum Association (via Purchasing.com) show a 16.8 percent drop in North American aluminum production this year. Data through May show that demand for all forms of aluminum is 26.7 percent below a year ago.

Stundza notes that some analysts believe “the reduced-stockpile trend for steel will start to reverse in August,” pointing to anecdotal data that suggest “the distribution link in the supply chain is in the midst of accumulating inventory.”

See also: The Mid-Year State of Global Steel Production

Resources

Metals Activity Report: Destocking Continues at U.S., Canadian Metal Centers
Metals Service Center Institute, Aug. 17, 2009

Destocking Continues at North American Metal Service Centers
by Tom Stundza
Puchasing.com, Aug. 18, 2009

July 2009 Crude Steel Production
World Steel Association, Aug. 20, 2009

June Steel Shipments Up 12.1 Percent from May
American Iron and Steel Institute, Aug. 19, 2009

June 2009 Crude Steel Production
World Steel Association, July 20, 2009

Metals Industry Business Intelligence
by Tom Stundza
Purchasing.com, Aug. 13, 2009