SMU Data and Models

SMU Steel Buyers Sentiment Index Takes Tumble

Written by John Packard

Buyers and sellers of steel continued to be optimistic about business but less so than a few months ago. Since then Sentiment has been trending lower as the strain of ever lower steel prices, issues regarding demand, lower commodity prices and shrinking margins due to high inventory levels are affecting both buyers and sellers. Today Steel Market Update (SMU) released our Steel Buyers Sentiment Index which measures how those involved in the flat rolled steel industry feel about their company’s ability to be successful in both the current market conditions (Current Sentiment) as well as three to six months out into the future (Future Sentiment).

SMU Steel Buyers Sentiment Index (Current) is +37 down 10 points from what we reported just two weeks ago during the middle of the month of September. This is the lowest reading for Current Sentiment since the first week of March 2014. Sentiment (Current) peaked in the first week of June when SMU reported it at +61. We have been tracking lower very slowly but methodically since then. That is until this week as a 10 point jump is significant. The last jump of this size was between mid January 2015 and the beginning of February (+56 down to +46).

Even taking our data and smoothing it out through the use of a 3 month moving average (3MMA) we found a significant change to both our Current and Future 3MMA as both dropped 3.5 points compared to our last measurement. The Current 3MMA graphic can be seen below. The +49.83 is the lowest reading seen since early May 2014 when Sentiment 3MMA was reported at +46.5.

Future Sentiment Index Down 10 Points

SMU Steel Buyers Sentiment Index (Future) is +43 down 11 points compared to two weeks ago when we reported the index at +54. Last time our index was at, or lower, than +43 was the first week of June 2013 when we reported Sentiment (Future) at +40.

When looking at Future Sentiment from a 3 month moving average (3MMA) perspective to smooth out any bumps in the data, we dropped 3.5 points from +55.8 to +55.0. The high for our 3MMA (Future) was in the middle of March when we reported a +63.

What Our Respondents are Saying

Low selling price with same margin is making it very difficult to make a gross profit $ that pays for overhead.” Service center

“Rain in southeast has slowed construction.” Manufacturing company

Demand is fine. Pricing is a little tough, but we’re able to maintain margins. We should be having more trouble in this kind of market, but I’m not complaining.” Service center

It will be a difficult environment but there are still opportunities.” Steel mill

About the SMU Steel Buyers Sentiment Index

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 and 39 percent were service centers/distributors. The balance of the respondents are made up of steel mills, trading companies and toll processors involved in the steel business.

Click here to view an interactive graphic of the SMU Steel Buyers Sentiment Index or the SMU Future Steel Buyers Sentiment Index.

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