Economy

Steel Buyers See No Change in Economic Activity for H2

July 7, 2014

Steel buyers in the June Institute for Supply Management (ISM) Steel Buyers Survey held fast to the belief that the general trend of economic activity will remain the same for the next six months, unchanged from 66.7 percent.

Incoming orders are expected to remain the same for 50 percent of steel buyers surveyed and increase for 33.3 percent. Order levels were about right for most efficient operation for 58.3 percent of respondents, up from 25.0 in May, however, 33.3 percent said they were still below most efficient levels.

At present production rates and with no new orders, current order books were expected to last 1-2 months by 33.3 percent (down from 58.3 percent), 2-4 month by 33.3 percent (up from 25 percent) and 4-6 months and more than 6 months by 16.7 percent each (up from 8.3 percent each in May). Backlogs are expected to remain the same for 66.7 percent of respondents and increase for 25 percent.

Tons on hand would cover current shipping levels for 0-1 month said 25.0 of those surveyed, 1-2 months said 58.3 percent and 2-3 months said 16.7 percent of respondents. Interestingly, percentages were the same as in May. Shipping levels were above those of 3 months ago for 41.7 percent of buyers and the same for 50 percent. Overall, shipping levels were higher or the same as one year ago.

Inventory levels were unchanged compared to 12 months ago reported 41.7 percent while 33.3 percent said tons on hand were higher by 10 percent. More than half of respondents said they will maintain inventory levels for the next six months while 41.7 percent said they plan to decrease levels.

Selling prices were viewed as competitive by 83.3 percent of buyers, up from 75 percent in May.

Short time and layoff response was unchanged from May with 91.7 percent having no issue with either. Plans for hiring were slightly more optimistic moving to 56.3 percent from 50 percent the previous month. Seventy-five percent of respondents said they had no plans to build or buy new manufacturing facilities within the next year.

Foreign mill prices were viewed as below or well below domestic prices by 50 percent of those surveyed, down from 58.4 percent in May. Steel buyers expected dependence on off-shore sources to increase in the May survey (57.1 percent) and in June 55.6 said their dependence will remain the same for the next six months. According to buyers surveyed, foreign mills have become more active and more aggressive in seeking U.S. business.