Though service center inventories are only moderately inflated, the destocking process is likely to be slow and grueling, market sources said Monday.
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The Metals Service Center Institute said late last week that overall service center inventories are holding at about 2.6 months on hand -- up from 2.3 in June of last year, and up about 7% in terms of volume.
While 2.5 months on hand is generally accepted to be a healthy inventory level, end-user demand is not pulling that inventory away faster than it can be replaced by imports that have been marooned at the docks.
One buy-side source said he was almost ready to write off 2015 entirely and start to focus on next year.
A second said that many imports' late arrival forced service centers to dabble in the spot market to keep customers happy while they waited -- effectively forcing them to double-buy.
"I think there is still inventory overhang from imports," said one buy-side source. "Lots came in late. Lots got stuck at ports waiting for trucks. Lots of inventory on service center floors -- and all that late steel created needs for spot buys domestically."
Service centers themselves are not participating heavily in the mill spot market, said one mill source, who added it might be related to many service centers relying on their contracts for steel.
A buy-side source confirmed that many service centers structured their contracts in a flexible way to keep themselves out of the spot market. Lumping multiple product categories into a single contract structure and crafting various rebate schedules has so far insulated most service centers from the spot market, keeping prices relatively moribund.
Platts kept its hot-rolled assessment level Monday at $460-$470/st and its cold-rolled assessment at $580-$590/st. All prices are normalized to a Midwest (Indiana) ex-works basis.