SMU Data and Models

SMU Steel Buyers Sentiment at Record High

Written by John Packard

Steel Market Update (SMU) Steel Buyers Sentiment Index reached new highs this week. Buyers and sellers of flat rolled steel were the most optimistic we have seen since SMU first began measuring Sentiment in October 2008. Our Sentiment Index was measured at +58 which is up 15 points since early April and exceeded the previous high of +49 recorded back in mid-January 2012 by 9 points.

Looking at Sentiment from a longer view perspective, our 3 month moving average (3MMA) is +43.33 which matches the highest level which was last seen in March 2012. One month ago our 3MMA was +41.00 and this time last year Sentiment 3MMA was +20.17. Buyers and sellers of steel are gaining confidence in their company’s ability to be successful in the current market.

If you look at the graphic located a little further down in this article, you will note that SMU Steel Buyers Sentiment bounced higher beginning in early 3rd Quarter 2013 and has been well within the optimistic range of the index ever since. Going back to October through today, steel prices have consistently been above $600 per ton and are close to reaching the highs achieved in early January of $680 per ton.

Having prices near their recent cycle high is one reason why respondents are more optimistic about their company’s ability to be successful in the current market environment. Beside mill prices moving higher, we are also seeing service center spot prices as firming and moving higher to their customers. This provides a basis for short-term confidence that inventory values won’t quickly erode and margins should improve. The second reason we are seeing a boost in confidence is demand for manufactured goods is improving as we start to get a break in the weather and movement in the non-residential construction markets.

Future Sentiment Also Reaches Record High

The second part of our Sentiment Index is to ask buyers and sellers their opinions on how successful they think their company will be three to six months into the future. SMU Future Sentiment Index was measured this week at +72 setting an all-time record high and breaking the previous high of +66 set just two weeks ago.

As Sentiment Goes So Do Steel Prices (or vice versa)

As you can see by the graphic below SMU Steel Buyers Sentiment Index and hot rolled steel pricing tend to move in tandem. We have seen both HRC averages based on Steel Market Update indices move radically higher over the past couple of months. Steel prices are moving due to supply disruptions at the domestic integrated steel producers and we would anticipate we would see Sentiment moderate once these disruptions are resolved.


About the SMU Steel Buyers Sentiment Indices

SMU Steel 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 success 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 slightly less than 600 North American companies to participate in our survey. Our normal response rate is approximately 110-170 companies. Of those responding to this week’s survey, 45 percent were manufacturing companies (down from 54 percent responding in our last survey) and 43 percent were service centers/distributors (up 10 percent from the 33 percent reported in our last survey). The balance of those responding to this week’s survey were made up of steel mills, trading companies and toll processors involved in the steel business.

In the space below we have our interactive graphic for our Sentiment Index along with our full set of historical data going back to 2008 when we first started the Index. If you are reading the newsletter from your email inbox you will only see a blank white box. Once you are logged into the website you will be able to not only see the graphic but manipulate it (and also see a table of the data). The easiest way to accomplish this is to go to the website, log into the site and then click on the Read Full Text link at the top of this newsletter. If you need assistance we are here to help you: 800-432-3475.

{amchart id=”109″ SMU Steel Buyers Sentiment Index- Survey}

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