Service Centers in Major Inventory Reduction Mode

When it comes to the laws of supply and demand within the steel industry, many steel executives in their quarterly conference calls will reference steel service center inventories.  As you look at the graphic below you can clearly see the trend change as steel service center inventories began to balloon in 4th Quarter 2014 and 1st Quarter 2015. Based on our proprietary calculations, we have the U.S. flat rolled service centers as carrying 1.1 million tons of excess flat rolled inventories as of the end of January (Apparent Excess/Deficit analysis is available to our Premium members every month).

SMU is forecasting that inventory excess levels at the service centers will be shrinking over the next couple of months due to the efforts being made now by the distributors. As you can see from the graphic below, the percentage of service centers reporting they are reducing inventory has grown to levels not seen since the Great Recession (2008/2009). Our flat rolled steel market analysis (survey) from this past week had 66 percent of the service centers responding that their company was reducing inventories.