SMU Steel Buyers Sentiment Index at +7
Jun / 04 / 2010 - SMU Steel Buyers Sentiment Index at +7
Steel Market Update Buyers Sentiment Index reading is in optimistic territory
Steel Market Update (SMU) Buyers Sentiment Index continued to break into the “optimistic” territory with a new reading collected this week of +7. This is the fourth consecutive optimistic reading going back to April 16, 2010. The +7 index reading is essentially unchanged as the reading taken during our last survey the week of May 18, 2010.
Construction Holding Back our Index from Gaining More Optimism
Frustrations continue in certain pockets of the steel industry, especially with those companies closely tied to the construction end of the market. Here is an example of the thought process of a manufacturing company as they described their current business conditions: “[We] continue to be squeezed like a lemon on a hot June day as steel price increases are not met with customer acceptance and so margins are eroding significantly.” They went on to discuss their relationship with their mill suppliers, “[We are] beginning to assert leverage over the mills as have been loyal to this point but no more. My strategy is to balance my demands and work them against each other as partnerships have been useless during this latest price march.”
Another manufacture of construction related products had a lot to say as the residual effect of the most recent climb in prices continues to haunt this company, “I am still not confident in the rise of the economy, and I feel the steel mills got too aggressive with the steel price increases. That aggressive approach pushed bid prices higher, and as the market leader in our area, we have seen several construction projects cancelled or delayed due to the increases we had to pass along. The mills pushed through these increases using a lot of unsupported data that has seemed to not hold water for more than a couple months, then they switched to a new reason. It shows that these oligopolies (mills and iron ore mining) have used their weight to bully around prices. I think those aggressive moves setback the recovery in some areas by several months. I like to see AIA billings going up, but if the budget estimates and the subsequent bids come in too high on that architectural work, these projects will not go forward and the projects will be delayed or canceled. The AIA is only a sign of the work on the front side and has little to do with what will actually happen.”
The SMU Buyers Sentiment Index of +7 is barely in the optimistic category. One service center put their feelings about the existing business levels this way, “Fair is not very exciting, but as service centers start to reduce purchases again, any slight pickup in demand down the road may tax the inventories available which may solidify the prices.”
Another manufacturer reported their business as being up by only 4% this year to date compared to this time last year. Even with anemic sales they reported, “There are new opportunities for us and we are doing everything we can to make our product available to these new customers. We have picked up a fair amount of new business and that is promising.”
Future Sentiment Continues to be solidly optimistic
Our SMU Future Buyers Sentiment reading came in at a solid 32.7 which is in-line with recent readings and every measurement taken so far this year have been on the optimistic side of our graph.
About our SMU Buyers Sentiment Index
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.
Positive readings will run from + 10% to + 100% and the arrow will point to the right hand side of the meter 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 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.
Currently we send invitations to over 700 North American companies to participate in our survey. Our normal response rate is approximately 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.
