Leadtime report
Staff -- Purchasing, 2/5/2004 2:00:00 AM
There's trouble brewing in steel bars
For the 12 months ending January 2004, leadtimes for hot-rolled steel bars averaged some 20% longer than year earlier. Most of the tightening has occurred over the last six months as the percentage of bar buyers reporting off-the-shelf availability dropped from 56% to 47% and the percentage reporting leads in excess of 11 weeks jumped from 4% to 20%. Behind the tightening: Bar demand is rising on a faster-than-expected return to growth in U.S. machinery manufacturing, heavy restocking activity among service centers, and a pickup in parts production for nonresidential construction.
Pump flow slows
November and December of 2003 saw a marked lengthening in average leadtimes for pumps as a 5% pickup in new-order bookings over 2002 really accelerated after Labor Day. The fast manufacturing recovery prompted a round of equipment maintenance (which had likely been deferred during the protracted downturn) as well as apparent restocking activity at plant storeroom and distributor levels. January brought relief, however, as the percentage of buyers reporting off-the-shelf availability doubled and the percentage reporting leads in excess of 11 weeks fell five points.
Acetic acid leads double
Leadtimes for acetic acid are now running roughly double their year-ago levels. In fact, leads have been on a gradual stretching trend for some three years as demand has been growing at a 3% annual rate while global production capacity has been flat. Acetic acid sells into diverse industrial markets, so there's good reason to believe the economic recovery will support continued growth. There's new capacity under construction in China, but it's not scheduled to be operating until 2005. Upshot: After rising 4¢/lb over the course of 2003, buyers can expect more price inflation in 2004.
LDPE looks dicey
The stretching trend for polyethylene (PE) leadtimes peaked a few months back, but national average delivery times have certainly not returned to the lows seen in 2000-2001, nor are they likely to now that the economy is showing signs of sustained recovery. As leadtimes progressed from a normal range of 4-11 days in 2000-2001 to normal a range of 6-18 days in 2003-2003, PE prices moved up some 20-25¢/lb. Rising demand plus continued margin pressure from high energy prices has sellers looking for a new round of price increases (approximately 4¢/lb) for March.
Aluminum sheet & strip supply stays loose
There's been a lot of talk about supply tightness in nonferrous metals, but, so far, the trouble with aluminum is pretty much confined to ingot on the global stage. Domestic demand for flat-rolled remained weak through end-2003, especially from auto parts and fasteners producers, building products makers, food and beverage can and closures manufacturers, and machinery builders. The perceived brighter purchasing outlook for 2004 is pinned to demand growth from makers of consumer durables, but sheet supply will probably remain loose until the second quarter or later.
Containerboard hike will be a tough sell
Fed chairman Greenspan says measuring economic strength is as simple as tracking box sales. Unfortunately, boxes didn't have a stellar sales year in 2003. Annual sales of linerboard and corrugating medium were stuck at 36 million tons, and, even with year-end paper mill inventories at their lowest levels in a dozen years, box makers had no worries about supply. Analysts say the growing manufacturing sector will boost demand for corrugated, but they don't say when it will start. The mills hope it's March since they are trying to raise containerboard prices for the first time since July 2002.
Beware trend shift in flat-rolled
Technically, the U.S. market for flat-rolled steel is classified as loosening. Leadtimes for the latest 12 months are still below their corresponding year-earlier averages, but that's not difficult in view of last year's tariff-induced supply crunch. In reality, sheet steel supply is about to get very tight. Imports are down, domestic mills are operating at reduced levels, and buyers are double booking to avoid Q2 scrap surcharges. Mill order books for March shipments were closed in early January. Percent of buyers reporting HR sheet leads in excess of six weeks has doubled to 23% over the past six months; percent reporting leads at 11+ weeks has risen from 1% to 8%.
Acetic acid purchasing off, prices down
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