|RELIANCE STEEL & ALUMINUM CO filed this Form 10-Q on 05/02/2019|
Tons sold and average selling price per ton sold amounts exclude our toll processing sales (as we process the metal for a fee, without taking ownership of the metal). Same-store amounts exclude the results of our acquisitions (other than our purchase of the remaining 40% ownership of Acero Prime) completed in 2018.
Our net sales were near record levels in the first quarter of 2019. Prices for almost every product we sell increased in the first quarter of 2019 compared to the first quarter of 2018 as Section 232 tariffs continued to support higher metals prices.
Demand in the automotive (which we serve primarily through our toll processing operations in the U.S. and Mexico) and aerospace end markets remained strong. Demand in the non-residential construction (including infrastructure), heavy industry and energy (oil and natural gas) end markets remained steady. For the first quarter of 2019, our same-store tons sold decreased 6.0%, consistent with the industry decrease of 6.1% reported by the MSCI, and included one less shipping day.
Since we primarily purchase and sell our inventories in the “spot” market, the changes in our average selling prices generally fluctuate in accordance with the changes in the costs of the various metals we purchase. The mix of products sold can also have an impact on our average selling prices.
Our same-store average selling price per ton sold in the first quarter of 2019 increased 12.8% compared to the first quarter of 2018 given increased mill pricing for most products we sell. As carbon steel sales represent approximately 53% of our sales dollars, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.
Our major commodity selling prices changed year-over-year as follows:
Cost of Sales
The increase in cost of sales in the first quarter of 2019 compared to the first quarter of 2018 is mainly due to higher average cost per ton sold. See “Net Sales” above for trends in both demand and costs of our products.
Also, our last-in, first-out (“LIFO”) method inventory valuation reserve adjustment, which is included in cost of sales and, in effect, reflects cost of sales at current replacement costs, resulted in a credit, or income, of $12.5 million in the first quarter of 2019 compared to a charge, or expense, of $25.0 million in the first quarter of 2018.