Steel Market Update Buyers Sentiment Post New High
SMU Steel Buyers Sentiment improved over the past two weeks and our Meter is now at -21.6% which is 10.6 points better than our reading of two weeks ago and it is the most optimistic level we have seen since we began measuring Sentiment in November 2008. Our SMU Future Sentiment Reading continued its optimistic trend measuring +16.4% although this is 7.9 points lower than our reading calculated two weeks ago.
Although our Sentiment Measurement has shown improvement over the past couple of months we have not yet broken into positive or optimistic territory.
“The start of the year hasn't been a good as I expected. Demand is still very slow. The weather has been cold down South to start the year and cold up North too. I hope the "train" starts moving soon!!!” (Service Center Executive)
A construction related manufacturer presented the following thoughts, “Companies are going to fail, as end prices can't increase due to oversupply while the mills increase their prices. Ironically, this will then bring supply and demand back in line and give the industry more pricing power. But it's going to be a hard six months.”
Many buyers point out their lack of optimism due to the seasonality of their business and the need to wait it out for another 3 to 6 months. The most negative companies are those associated strictly with the commercial construction business. As one manufacturer pointed out, “We are seeing weak demand, escalating raw material costs and declining sales prices in our markets. Not a good equation.”
A number of our contacts have pointed out we may be in a new year but we have not yet shaken off the “business blues”. Here are the thoughts of one Northern service center, “Market has not dramatically changed, mills have decided to raise pricing although real demand has not changed. This should be interesting when and if some mill decides to increase utilization. This could be short lived - say the first quarter then soften in the second.”
SMU spoke with the owner of a large residential construction related manufacturer late last week. During the conversation he used a football analogy to depict their current situation, “When your team goes 0-16 then they come back the following year to win 2 games – they are better but in reality they still suck….”
Welcome to 2010.
SMU Buyers Sentiment is calculated as part of our Market Survey which we try to conduct every other week (excluding U.S. holidays). SMU invites almost 700 companies to participate in our Market Surveys. We generally average 150-200 response rate for each Survey with approximately 50% being manufacturers and 50% being service center/distributors. We use a scale of zero (0%) to plus 100 (+100%) to measure optimism and from zero (0%) to minus 100 (-100%) representing pessimistic attitudes. We are specifically interested in measuring active steel buyers and seller’s attitudes about their company’s prospects now and then 3-6 months in the future. The current responses are calculated and then become the SMU Buyers Sentiment Meter Reading. The 3-6 month in the future responses are calculated to provide a Future Buyers Sentiment Reading.
The SMU Buyers Sentiment Meter can be found on the Home Page of our website – www.steelmarketupdate.com – right next to our Price Momentum Indicator Arrow (currently pointing “up” representing prices are moving higher). We provide current and past SMU Buyers Sentiment and Future Sentiment data for our readers in the Steel Prices section of our website.