SMU Data and Models

Premium Level Market Analysis Recap

March 7, 2014

On Monday of this week, Steel Market Update (SMU) began our early March flat rolled steel market analysis. We sent invitations to just under 600 companies associated with the industry. Of the companies responding 44 percent were manufacturing companies (end users), 40 percent were steel service centers/wholesalers (distributors), trading companies represented 6 percent of the total while steel mills and toll processors each had 4 percent and the balance (2 percent) was suppliers to the steel industry (such as paint or chemical companies).

Our mix of market segments are intentionally set so that the majority of the respondents are manufacturing companies followed closely by distributors.

The questionnaire is broken into two segments. First we canvass the entire group with a number of questions regarding Sentiment, Demand, opinions on Steel Pricing, etc. From there we move into market segmented questions where each group has their own special questionnaire.

We provided information regarding the results of our SMU Steel Buyers Sentiment Index, Mill Lead Times and Negotiations and where the group felt spot prices out of the mills would be as of the beginning of April.

The results of this week’s survey are on the website and available for our Premium Level members only. Here is a link to the presentation.

Here are a few notes about the survey results which you may want to investigate further within your company or with your suppliers/customers:

Demand – we saw a drop in the percentage of respondents reporting demand as improving. From the beginning of February to this week the percentage went from 32 percent to 24 percent. A question we have: Is this weather related only or a harbinger of things to come?

When looking at the market segments we did not catch a large negative move among either manufacturers or distributors.

SMU opinion is demand is still “decent” and in line with 2013 levels (although impacted by winter weather). We are hearing from those taking the survey a note of optimism once weather is no longer a factor.

SMU Note: we do not have a large contingent of automotive OEM’s or sub-contractors taking our survey. We are relying on large service centers who are supplying those groups for information regarding production schedules and changes in production.

Both manufacturing companies and service centers are reporting in growing numbers their inability to meet sales forecasts for the prior month. We have not seen manufacturers at 48 percent failure rate for quite some time (service centers reported failure rate at 37 percent of the respondents).

Inventory buying patterns appear to be relatively balanced at both manufacturing companies and service centers (although service centers reporting reducing inventories rose to 29 percent which is the highest level since late 3Q 2013).

Service center inventories stood at 2.25 months, down slightly from our last survey.

Service centers are dropping prices in ever greater percentages based on the latest market analysis. 54 percent of manufacturing companies reported service center spot prices as falling. This is up from 20 percent in early February. Service centers were not quite so bearish – but, even so 33 percent of the distributors reported that their company was lowering spot prices. This is up from 21 percent at the beginning of February.

We will have more on this subject in Sunday evening’s Executive Level newsletter (which you receive as part of your Premium Level membership).

There is more for you to review in the Power Point presentation which can be found under Analysis-Survey Results (must be logged in as Premium to access this information).