Final Thoughts

So, we have our service center inventories at 2.5 months of supply, down slightly from the 2.6 months we got from our distributor data suppliers the previous month. This is not from our survey; we decided to put that data aside as it was suspect – it had both buyers and sellers contributing to the numbers (and what the heck do salesmen know about inventory?). The data we are collecting now comes from heads of purchasing or top executives of the service center. We have a nice mix of distributors and a few surprises that we don’t want to talk about publically (after all there is competition out there). Our end of November number is 2.5 months of supply. So, what the heck does that mean?

The answer to that question comes from our flat rolled and plate steel market trends analysis – which is a long way to say it comes from our twice monthly survey. We reported some of the results from this week’s market trends analysis – lead times and negotiations. These are two items we have been watching closely for years, and something you won’t get in any other newsletter or market intelligence report. Mill lead times are short, meaning you can get steel in a very expedited fashion from the time you place the order until it delivers. Hot rolled lead times now average about four weeks, according to our data. Average is an important concept to understand. This doesn’t mean the lead times from all mills are four weeks; some may be three, some may be six, but our average is just under four. If you have 2.5 months of supply of hot rolled and you have “X” days of supply on order already – do you need to buy more steel right now? Coated steels are a little less forgiving, but at 6-7 week average lead times, there is no pressure to buy steel right now. The net result then being that the steel mills need to negotiate prices in order to entice service centers to buy more steel.