Weekly Market Update May 24, 2012

Non residential starts down, industrial up. In 3 months through April non residential starts were down and the single month of April was down 21% from April last year. Three months through April was down 6.2% y / y with negative momentum of 9.7%, (Table 1). Excluding apartments > 4 stories the three month comparison was down 8.2%. The only bright spot was warehouses, up 55.9% in 3 months y / y; even apartments have slowed and now have 41.5% negative momentum. This is only the second time in 16 months that the three month growth rate has been negative (Fig 1). The Architects Billing Index also moved to contraction in April after five straight months of expansion. In contrast, industrial starts were up 108.7% y / y in 3 months through April driven by energy and power projects. All regions except the Great Lakes and New England expanded strongly. With projects already confirmed to start this year, the SW, SE and MA regions are already way ahead of last year’s total.	Table 1
Service center intake, shipments and inventories, US and Canada. US service centers built inventory in all products in April as daily shipments of all products declined. Overall months on hand grew to 2.57 in total from 2.32 at the end of March. The recovery of plate and flat rolled has been better than that of long products since the end of 2009, (Table 2 and Fig 2). No product group has yet achieved the level before the crash and all took a step backwards in April. Canadian service center shipments in April were also down but only on account of plate and pipe and tube. Total months on hand rose from 2.99 to 3.26 because with two less days in the month, April’s total shipments were down by 52,000 tons. Daily shipments of plate are still well above the level before the crash and bar products continued to recover strongly. Structurals have had the weakest recovery of all products for almost a year, (Table 3 and Fig 3).	Table 2 & Fig 2
Apparent supply of all steel products. AISI data for all steel products in Q1 2012 indicates a growth of 15.4% y / y, (Table 4). Longs were up 19% and flats up 15%. There was a wide spread between the high and low of individual products. Over the longer term, (18 months), flat products have done much better than longs, (Fig 4). Import market share for all products combined was 23.1% in Q1 2012 and has ranged between 20% and 25% for the last two years.	Table 4
Producer price indexes, construction materials. The BLS producer price indexes indicate that the price of concrete is lower than it was in January 2009 but that structural steel, HSS and lumber have all escalated. HSS has become less competitive compared to structural steel shapes in the last three years as both have lost ground to lumber (Fig 5). The price of lumber seems to be immune to commodity market volatility as its price index has been in a narrow range for the last 20 years. The price of asphalt has been steadily increasing for three years as concrete has been flat to down, (Fig 6). This will continue to incent State DOT decision makers to favor continuously reinforced pavement with a resultant positive effect on rebar demand. The overall PPI for “Materials and Components of Construction,” has been rising steadily at a y/y rate of 2 to 4% for the last two years and is now higher than it was before the recession. Please note that these indexes only represent relative price changes since 1982, they do not compare specific dollar based unit prices.	Fig 5
Producer price indexes, engineering materials. Impression die forgings have steadily gained in competitiveness against castings since early 2009. There is no PPI data for aluminum forgings and castings, the only guide we have to aluminum is the mill shapes index. This indicates that the threat to steel forgings has increased since the beginning of the recession which has negative implications for auto forgings in particular, (Fig 7). The healthy spread between carbon steel wire and plastic construction products that existed until the end of 2003 had almost disappeared by the middle of last year but so far in 2012, the spread has been re-emerging in favor of steel wire, (Fig 8). Please note that these indexes only represent relative price changes since 1982, they do not compare specific dollar based unit prices.	Fig 7