Nov. 30, 2006 — If historic patterns hold true, a recent Metals Service Center Institute report indicates that steel inventories at U.S. metals service centers may have peaked and could begin a slow decline in the coming months.

The Metals Service Center Institute’s Metals Activity Report (MAR) for October shows that U.S. service center steel inventories reached 16.8 million tons by Halloween, up 32.3% from the end of October 2005; this total was only 1.2% higher than at the end of September this year.

Expressed in terms of months of supply on hand, U.S. service center steel inventories declined to 3.6 months from 3.8 months in September. On a seasonally adjusted basis, U.S. steel inventories have remained at 3.7 months of supply on hand for the last two months.

MSCI says that from peak to trough, steel inventory cycles tend to last about two years. Inventories typically grow for about 12 months, then decline for the subsequent 12 month. Since December 2005, when inventories began to build, monthly additions to U.S. service center stocks have averaged 410,000 tons, peaking at 674,000 tons in September. October’s additions to inventory were only 195,000 tons.

Canadian service center steel inventories declined to 1.38 million tons, down 6.2% from the previous month (although 37.1% higher than a year ago). At current shipping rates, Canadian steel inventories represent a 4.1-month supply, down 9.7% from the end of September.

U.S. Service Center Activity—MSCI’s report shows that October steel shipments from U.S. service centers of 4.62 million tons were down 1.2% from October 2005. For the first 10 months of the year, shipments of nearly 48.2 million tons reflect an increase of 3.9% from the same period of last year.

Aluminum product shipments increased 4.7% to 106,200 tons. Year-to-date shipments of 1.04 million tons are 3.5% higher than during the same period last year. Aluminum inventories at the end of October totaled 392,400 tons, an increase of 10.2% from October 2005 and up 1.1% from September 2006. At the current shipping rate, this represents a supply of 3.7 months, or 5.2% more than last year and 0.9% more than last month.

Canadian Service Center Activity—According to MSCI’s report, Canadian service centers shipped 337,400 tons of steel products during October, 6.8% less than during the comparable 2005 month. Year-to-date shipments of 3.4 million tons are down 3.1% from 2005.

Canadian shipments of aluminum products totaled 10,600 tons during October, or 5.4% more than a year ago. So far this year, Canadian service centers have shipped 106,000 tons of aluminum, or 3.9% more than during the 2005 period. Aluminum inventories of 33,000 tons at the end of October are down 2.6% from a year ago and up slightly from September. At the current shipping rate, this represents a 3.1-month supply, down 7.6% from last year, but up 1.5% from last month.

Founded in 1907, the Metals Service Center Institute has more than 420 members operating from about 1,200 locations in the U.S., Canada, Mexico, and elsewhere in the world. Together, MSCI members constitute the largest single group of metals purchasers in North America, amounting each year to more than 65 million tons of steel, aluminum, and other metals, with about 300,000 manufacturers and fabricators as customers. MSCI’s membership also includes almost all ferrous and non-ferrous industrial metals producers in North America. Metals service centers inventory and distribute metals and provide first-stage fabrication services.