Economy

ISM Steel Buyers See Foreign/Domestic Price Spread Beginning to Contract

May 6, 2014

Steel buyers in the April Institute for Supply Management (ISM) Steel Buyers Survey are expecting general economic activity to remain the same for the next six months. Higher orders are anticipated during the next three months but current order levels are still weaker than buyers would like.

Right now at present production rates and with no new orders, current order books would last 1-2 months for 54.5 percent of steel buyers and 2-4 months for 27.3 percent.

Inventories levels are stabilizing with 63.9 percent saying inventories are about right and 27.3 percent saying they are too high.

Shipping levels rose in April and are higher than 12 months ago. Selling prices were viewed as competitive by 72.7 percent of respondents.

The percent of buyers reporting workers on short time or layoff rose to 9.1 percent in April from 6.7 percent in March. New hires are planned by 45.5 percent of buyers. Most steel buyers reported their company has no plans to buy or build new manufacturing facilities within the next year (81.8 percent).

Dependence on off-shore steel for the next six months is expected to rise slightly with 42.9 percent saying dependence will be greater as compared to 33.3 percent in March. Interestingly, steel buyers report the spread between foreign mill and domestic prices is beginning to contract. Foreign mill prices are considered below or well below domestic prices by 36.4 percent of steel buyers compared to 60 percent of buyers in March, while 54.5 percent are seeing prices as not significantly different from domestic levels and 9.1 percent report prices are higher than domestic steel.