Aug. 16, 2017

Economic Data Doesn’t Add Up for Service Centers

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 an exceptional GDP growth rate of 4.1 percent. Growth like that has historically been a harbinger of tremendous demand in the steel sector.

Just this week, 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 Association for Manufacturing Technology. “If the USMTO numbers aren’t convincing enough that a recovery is under way, certainly the buzz among our members underscores that a recovery is,” AMT President Doug Woods says.

This should be tremendous news for the steel distribution industry. But to date, the service center sector hasn’t truly captured this renewed excitement.

MSCI numbers are up from the doldrums of 2016 but not at 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 3.5 percent through the first half, compared with 2016. The story was a little better for aluminum, with year-to-date shipments up 7.1 percent. However, the picture becomes less rosy when placed against conditions just three years earlier. Steel shipments remain down 8.4 percent, compared with 2014, while nonferrous shipments increased just 2.9 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,” Woods says.

Here’s hoping the metals distribution industry, and steel in particular, begins to reap some of the rewards of this tremendous uptick in manufacturing, rather than the rest of manufacturing sliding down to fall in line with the modest growth in service center activity.


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Saturday, October 21, 2017