Business conditions affecting manufactures and flat rolled steel service centers are expected to be more challenging based on the SMU Steel Buyers Sentiment Index released today. Buyers, sellers and those associated with the flat rolled steel industry were less optimistic than what we had been seeing over the past 27 months.
Our Current Sentiment Index, which measures how buyers and sellers of flat rolled steel feel about their company’s ability to be successful in the current market environment, is +32 this week which is down 5 points from the beginning of the month and is 29 points lower than the +61 reported during the middle of June 2015. The SMU Steel Sentiment Buyers Sentiment Index is down 32 points from the +64 reported in mid-October 2014.
The +32 reported this week is the lowest reading we have had since the beginning of June 2013 when Sentiment was measured at +22 (we have been above +32 ever since the middle of June 2013).
When looking at Current Sentiment based on a three month moving average (3MMA) as a way to take the bumps out of the data. At +45.83 our 3MMA experienced a 7.5 point drop over the past month and is well below the +61.67 reported one year ago.
Future Sentiment Index Sagging as Well
MU Steel Buyers Future Sentiment Index, which covers how buyers and sellers of flat rolled steel feel about their company’s ability to be successful three to six months into the future, was measured at +41 this week. This is down 2 points from the beginning of the month and 13 points from one month ago. The trend is definitely less optimistic and has been that way since the middle of June 2015.
Looking at our Future Sentiment Index based on a three month moving average (3MMA) the trend is also less optimistic as the 3MMA slipped 6.67 points over the past month and is at the lowest levels measured going back to June 2013.
What Our Respondents are Saying
“It is going to be extremely difficult to make money at this level of steel pricing until other players in the market start adjusting gross profit margins up in order to provide enough gross profit dollars to cover the fixed costs of moving steel for their customers.” This service center went on to say, “We are in a good position but it will continue to be painful until the market adjusts to the lower steel selling prices.”
“There are still many opportunities but the backdrop is negative.” Steel mill
“Weakening! Could be poor 4th Quarter and go into 2016.” Service center
“Things could get real slow if the Granite City Mill closes.” Toll processor
“[I] don’t really see much changing in the near future.” Service center after telling us business conditions were “poor” for their company.
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.
John PackardRead more from John Packard
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