SMU Data and Models
SMU Steel Buyers Sentiment Index Continues Optimistic Path
Written by John Packard
July 7, 2014
The fact that steel prices have been moderating and, in some cases, moving lower has not dented the enthusiasm buyers and sellers of flat rolled steel are showing based on the Steel Market Update Steel Buyers Sentiment Index. The latest market analysis produced during the middle of June is pegging Sentiment at +57, up 3 points from our last measurement conducted at the beginning of June and 5 points away from the all-time record high of +62 achieved during the middle of May 2014. Any reading above +10 is considered to be within the optimistic range for our index.
“Moving into the summer we are very pleased with the pace of orders,” is the opinion expressed by one service center as they responded to our survey questions.
This service center’s comment was echoed by many others during the middle of June in New York City as Steel attended events surrounding Steel Success Strategies.
Another service center reported during the survey process, “Spot business has increased with supplier issues still remaining, but expect auto business to slow a bit as summer shutdowns approach.”
One area of concern affecting a number of distributors and perhaps holding back Sentiment from breaking through to new highs is that of margin compression. “There is just too much competition at the small service center / steel broker level to make a reasonable margin on a consistent basis without incurring too much risk,” is how a pipe and tube distributor described it.
SMU Steel Buyers Sentiment Index has been clearly indicating a renewal of confidence by many segments of the steel industry during 2014. One year ago Sentiment was measured at +35, 22 points lower than today.
The 3 month moving average (3MMA) is now +55.50, the highest reading we have gotten for the moving average since we began measuring Sentiment in 2008. The 3MMA average trend continues to be optimistic even with our Future Sentiment Index being down 2 points to +62 (one year ago was +52).
We believe the relatively stable market conditions will keep Sentiment well ensconced in the optimistic range of the index. We are watching for a break down in pricing being offered to end users from service centers which would be one of the early signs of trouble ahead.
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 participate in our survey to almost 600 North American companies. Our normal response rate is approximately 110-170 companies. Of those responding to this week’s survey, 45 percent were manufacturing companies (unchanged from the 45 percent reported in our last survey) and 42 percent were service centers/distributors (up 3 percent from the 39 percent reported in our last survey). The balance of our respondents are made up of steel mills, trading companies and toll processors involved in the steel business.
Below is an interactive graph of our Sentiment Index (open white space if you are not on our website). In order to see and manipulate the graph you will need to be logged into the SMU website. Contact us at: info@SteelMarketUpdate.com or by phone at 800-432-3475 if you need assistance.
In the “white” space below is an interactive graphic of SMU Steel Buyers Sentiment Index from a historical perspective. You will need to read this article/newsletter on our website in order to access the graphics as they are stored on our servers. If you need help logging in please contact Brett in our office: 800-432-3475 or info@SteelMarketUpdate.com
{amchart id=”109″ SMU Steel Buyers Sentiment Index- Survey}
John Packard
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