Numbers Don't Add Up for Service Centers
By Dan Markham
The numbers are pretty staggering. Through the first seven months of the year, the Institute for Supply Management’s PMI, the go-to read on the state of the industrial economy, is reaching numbers the U.S. hasn’t seen in years.
The July PMI was at 56.3 percent, a number that was actually down from June but still representing an economy chugging along at a healthy clip. In fact, the July PMI and the year-to-date figure both correspond to a staggering GDP growth rate of 4.1 percent. Growth like that has historically been a harbinger of tremendous demand in the steel sector.
Later in August, another economic measurement told a similar story. The U.S. Manufacturing Technology Orders report shows year-over-year increases of more than 10 percent in June, the fifth-straight month of gains against 2016, say executives from the AMT. “If the USMTO numbers aren’t convincing enough that a recovery is underway, certainly the buzz among our members underscores that a recovery is,” says AMT President Doug Woods.
The Dow Jones Industrial Average is up more than 10 percent since the start of the year, and the U.S. unemployment rate was down to just 4.3 percent in August, the lowest the number has fallen to since before the recession.
All of this, one would expect, would be tremendous news for the steel distribution industry. But to date, the service center sector hasn’t truly captured this renewed economic excitement.
MSCI numbers are up from the doldrums of 2016, but not at either the levels or with the kind of momentum to stoke great optimism. Service center shipments had a great year-over-year gain in January, but have since increased little against the previous year.
Service center steel shipments were up just 3.3 percent through the first seven months of 2017 compared with the prior year. The story was a little better for aluminum, with year-to-date shipments up 6.8 percent. In both cases, year-on-year gains have been sliding as the calendar turned over. Moreover, the picture becomes less rosy when placed against conditions just three years earlier. Steel shipments remain down 10.1 percent compared with 2014, while nonferrous shipments are up less than 1 percent since then.
There remains cause for hope. AMT’s member companies believe the gains are just now starting, and will soon begin to hit a few major markets for service center products. “Over the next six months, AMT members look forward to a broadening of the recovery into areas like agricultural, construction, power generation and off-road machinery industries,” says Woods.
Here’s hoping the metals distribution industry, and steel in particular, begins to reap some of the rewards of this tremendous uptick in economic activity, rather than the rest of manufacturing sliding down to fall in line with the modest growth in service center business.