White Papers!

Steel Reports

We find last week’s tubular price increases on seamless products more aggressive than those on ERW (welded) products.

Increased obsolete auto body export price and scrap space consolidation bode well for buy-rated SCHN.

Our most recent Steel Distributor Survey reveals that overall demand for steel products in December remain weak, averaging -6.3% over the similar month last year. Lower demand levels were due to continued slowness in key steel end markets as well as typical seasonal factors.

Our most recent Steel Distributor Survey reveals that overall demand for steel products in December remain weak, averaging -6.3% over the similar month last year. Lower demand levels were due to continued slowness in key steel end markets as well as typical seasonal factors.

From our survey data, we find material ($20/ton) price increases on hot rolled and structural products, due primarily to increased scrap costs.

We contacted 50 steel product distributors across the U.S. to gain insight on domestic steel industry fundamentals including demand, pricing, inventories, import levels, and their 3 – 6 month outlook.

Y/y overall steel product demand growth averaged -4.9% in July (vs. -5.8% in June and -4.4% in May). Flat rolled markets, namely automotive, manufacturing, and residential construction, remained sources of weakness. In addition, flat rolled demand in the South from oil & gas and tanker markets moderated somewhat for the first time in 2007. Long product markets fared better due to continued strength in non-residential and infrastructure spending.

Overall steel product demand averaged -5.8% on a year-over-year basis in June (vs. -4.4% in May and 0.5% in April). We continue to see poor performance from the flat rolled markets, partially offset by stronger bar and structural product demand.

Overall steel product demand continued to be less than impressive in April as distributors waited for the surge in 2Q end user demand that never happened. Reported demand growth on a year over year basis was 0.5% compared to 0.8% in March and 1% in February.

Purchasing activity inched along last month as our contacts are reporting end market activity growth of 1% over February of last year compared to 0.4% in January and -1% in December.

Purchasing activity got off a slow, but positive, start in January as continued weakness in automotive and residential construction partially offset sequential gains reported in manufacturing, fabrication, and second tier distribution segments in regions other than the Mid West and Auto Belt.

For the month of December, year over year order activity growth averaged -1.2% with continued weakness in the Auto Belt and Southeastern regions being somewhat offset by stronger markets in the Deep South and western markets.

Based on our latest steel distributor survey, overall service center order activity in the month of November fell 1.4% on a year over year basis compared to 2.2% growth in October. On a sequential basis, 76% of our respondents reported flat growth, and 24% had a decrease in order activity.

Steel Distributor Report

Our most recent Steel Distributor Survey suggests demand fundamentals for steel products have not improved in November, averaging -2.8% on a year-over-year basis. Prices per ton for hot rolled coil of $535 remained stable sequentially as did prices for plate, structural, and merchant products.

After completing our 4Q07 stainless steel distributor survey, our near term outlook for the domestic market remains relatively pessimistic. Overall end market demand fundamentals have not significantly improved and shipments at the distributor level were reported to be weak.

From our survey data, we find prices for HRC fell to $535 (-$5) per ton as some of last month’s $20 per ton increase has been given back. Prices for plate and long products remain stable. Metal margins increased sequentially on all products, mostly due to declining ($9/ton) scrap prices.

Overall end market activity in March continues to be lackluster, averaging 0.8% growth over the same quarter last year compared to 1% in February and .4% in January. On a sequential basis, demand activity was unchanged with 68% percent of respondents reporting flat growth over February.

Major Industry White Papers

Commodity metals prices have increased significantly in recent years. This has boosted the economies of resource-rich nations but has added to the import bill in such consuming regions as North America, Europe and Asia. Metals have a strong business-cycle component; so, as economic growth has boosted world metals demand, prices have risen by 180% in the 2002-2006 timeframe; 200% from the cyclical low-pricing year of 2001.

Aerospace Reports

In our 4Q07 Aerospace Metals Supply Channel Survey, we spoke with a diversified group of industry contacts in titanium and nickel based alloy distribution, fabrication, manufacturing, recycling, and trading, gathering data on material prices, demand, inventory levels, lead times, and their outlook on near term market conditions.

Demand growth for titanium products slowed in 3Q07, primarily as the result of lower demand from commercial aerospace, for which shipments were reported down 16% over last year’s comparable quarter.

Demand growth from key titanium end markets remains strong but continues to stabilize. Overall demand for titanium products averaged 2.9% in May (vs. 7% in February and 10% in December).

Our survey results for 1Q07 indicate that the overall market for titanium products continues to be strong in 1Q07 driven primarily by continued strength in key commercial aerospace programs including Boeing’s 737/777/787 and Airbus A319/A320.

Titanium demand, although still very strong, is leveling out: Year over year demand growth reported by our contacts averaged 10% in the fourth quarter down from 15% in September and 37% in the same quarter last year.

Metals Reports

We have completed our 3Q07 stainless steel survey and have concluded that demand fundamentals have not improved. The weakness in service center purchasing that became apparent in last quarter’s survey has continued into 3Q07. Demand conditions are again weak due to end user purchasing delays and increasing reports of overall end market softness.

We spoke to twenty stainless steel flat rolled service centers in North America in order to gain insight into end-market demand, spot pricing, inventory levels, imports, lead times, and outlook for 3Q07. We believe our survey portrays an accurate analysis of current stainless steel industry conditions since approximately half of mill shipments move through a distribution channel before reaching the ultimate end-user.

Demand growth for stainless steel continues to be strong, driven by strength in aerospace, manufacturing, and fabrication end markets which offset further weakness in residential construction and appliance market. Average year over year growth in end market activity is averaging 3.9% in 1Q07 and is moderating from 6.5% growth in 2H06 due to tougher comparables in last year's quarter.