Steel Market Update Steel Buyers Sentiment Index Moves Higher
Those actively buying and selling flat rolled steel (hot rolled, cold rolled, galvanized & Galvalume) continue to be optimistic about their company’s chances for success in both the current market as well as looking three to six months out into the future. Steel Market Update (SMU) measured our SMU Steel Buyers Sentiment Index at +34 based on the results of our mid-August steel market survey. The newest reading is +13 points higher than what we measured at the beginning of August and the most optimistic reading we have seen since early May 2012.
Steel Market Update has found when market prices begin to rise our Sentiment Index will tend to rise along with prices. Flat rolled steel prices have been trending higher ever since Severstal NA announced a price increase on July 2nd. Since the beginning of July our SMU Sentiment Index is up +8 points and +16 points higher than the low of the year (+18 on June 5th and July 18th).
Even though our Sentiment Index showed improvement the comments left behind by those responding to this week’s survey were mixed. Here is a sampling of the responses – all made by manufacturing companies:
An east coast manufacturing company told SMU during the survey process, “Still no support in our industry for price increases but business levels are decent. We have seen an uptick in jobs that we are quoting and that is a good sign.” They went on to say, “We will beat our budget.”
While another manufacturing company associated with the construction industry told SMU, “I feel the economy is teetering on the edge of a cliff. Then, couple that with a Congress that will virtually do nothing, it might get worse before it gets better.” They went on to say, “We have a stable backlog, however increasing raw materials during an unstable time creates headwinds that will affect our company’s ability to compete against alternatives in the market place. The mills need to understand what non-oligopoly companies have faced for years, the customer is going to control the price not the vendor. We are winning work, we get the PO, and then we get threatened if we don't drop our price, they will pull the PO.”
“Better than last year but not at the expectation level for 2012 forecasted.” Manufacturing company.
“Construction remains in the toilet, tiny, tiny upticks in business, but no sustenance. It was one good day, one bad day. Now it's 2 good 1 bad.” Construction related manufacturing company .
With all of the bad news being reported about this year’s drought across the U.S. we were surprised to see the following comment from a manufacturing company associated with the agricultural business, “We anticipate crop yields will be down 13% from 2011. Not a big drop given the extent of the drought conditions this year.”
Future Sentiment Index up +8 Points
Our survey respondents continue to report optimistic opinions regarding what they perceive business conditions three to six months into the future and if their company will be successful at that point in time. The +48 reading measured this week is +8 points higher than what we saw during the first week of August. The +48 is the most optimistic reading we have seen since our SMU Future Steel Buyers Sentiment Index since mid-April but still below the historical high achieved in the middle of January 2012 when SMU pegged the Index at +63.
About the SMU Steel Buyers Sentiment Index
SMU Buyers Sentiment Index is a measurement of the current attitude of buyers and sellers of flat rolled steel products in North America regarding how they feel about their company's opportunity for growth in today's market. It is a proprietary product developed by Steel Market Update for the North American steel industry.
Positive readings will run from + 10% to + 100% and the arrow will point to the right hand side of the meter located on the Home Page of our website indicating a positive or optimistic sentiment.
Negative readings will run from -10% to -100% and the arrow will point to the left hand side of the meter on our website indicating negative or pessimistic sentiment.
A reading of “0” (+/- 10%) indicates a neutral sentiment (or slightly optimistic or pessimistic) which is most likely an indicator of a shift occurring in the marketplace.
Readings are developed through Steel Market Update market surveys which are conducted twice per month. We display the index reading on a meter on the Home Page of our website for all to enjoy.
Currently we send invitations to approximately 700 North American companies to participate in our survey. Our normal response rate is approximately 130-200 companies. Of those responding approximately 48% are manufacturing companies, 49% are service centers/distributors and the balance is made up of steel mills, trading companies and toll processors involved in the steel business.
Steel Market Update does canvass those being invited to participate in order to confirm their active participation in the flat rolled steel business. Our list is updated at least once per month and we are adding new companies on a continuous basis.
Steel Market Update will be conducting our next Steel 101: Introduction to Steelmaking & Market Fundamentals workshop on September 20-21, 2012 in Ontario, California. A tour of the California Steel Industries steel mill is part of our program. More detals can be found in the Events section of our website: www.SteelMarketUpdate.com
Steel Market Update will also conduct our 3rd Annual Steel Summit Conference on Monday, October 8, 2012 in Rosemont, Illinois - right next to Chicago's O'Hare airport and the Donald Stephens Convention Center - home of this year's METALCON which begins the following day. More details and registration can be found on our website in the Events section.