The current service center destocking will mean shortages and delays when manufacturing recovers. This makes raw material price increases inevitable. MSCI Report
Steel: US and Canadian first-half steel shipments totaled 14.8 million tons, down 43.9% year-over-year. US steel inventories at the end of the month were reported to be 5.98 million tons; down 44.4% from last year. Canadian steel inventories at the end of June totaled about 1.05 million tons, 33% below last year.
Aluminum: First-half shipments of 524,600 tons of aluminum were down 43.2% year-over-year for US Service Centers. US inventories at the end of June totaled 269,800 tons, a reduction of 44.1% from a year ago.
According to The Metal Service Center Institute-In Canada, first-half aluminum shipments totaled 65,100 tons, a decline of 26.4%. Month-end inventories totaled 31,700 tons, a decline of 15.7% from a year ago.
Sensemaking: Beware the “at current shipping rates, months of shipments fallacy” in the MSCI press release. This is simple arithmetic, not critical thinking. When demand recovers, “today’s current shipping rates ” are not going to be relevant at all.
The fact is these inventories are lowest since the early 1980’s, and when business resumes just a little bit, there will be nothing in the cupboard. And weeks and weeks of lead time to refill the pipeline.
The current service center destocking will mean shortages. Shortages will mean delays and raw material price increases. Delays and raw material price increases will mean higher prices for precision machined parts for finished products. You can bet dollars to donuts that the spotlight will be on you and your shop as you try to recover these increases- You’ll be called “Greedy business men fueling inflation! ”
So much for sensemaking.
Have a nice day!