The SMU Steel Buyers Sentiment Index ended the year on a “down” note as our Current Sentiment Index, as measured this week as a single data point, was the lowest reading we have seen over the past two years. When viewed as a three-month-moving average, which helps smooth out the data and provide a clearer view of the trend, we again saw a weakening in our index when compared to year-ago levels. Don’t get us wrong, our Sentiment Index is firmly in the “optimistic” segment of the Index. However, the results are not as optimistic as they were at this time last year and this is creating some concern as to what is in store for the industry in the year ahead.
The goal of the index is to measure how buyers and sellers of steel feel about their company’s ability to be successful today (Current Index), as well as three to six months into the future (Future Index). Results are posted as both a single data point and as a three-month moving average (3MMA).
Current Sentiment measured as a single data point registered +54, still an optimistic level, but down 11 points over the past month and the lowest reading in the past two years. Measured as a three-month moving average, Current Sentiment was 61.17, down from 62.83 in mid-November, and also the lowest reading since early 2016. Optimism was the highest his year when the Current Index registered +78 in mid-January.
The downtrend in optimism is much the same for steel executives asked to assess their chances for success in three to six months. As a single data point, Future Sentiment registered +57, down 2 points from early in December and down 20 points from the 2018 high of 77 in February. Measured as a three-month moving average, the Future Index was 59.83, well off the high of 72.83 in February.
What Our Respondents Had to Say
• “It’s a very tough environment. We’re looking for some leadership from the mills. They need to put a bottom on steel prices.”
• “There are still too many unknown variables that could affect swings. As a result, I believe many will tread lightly until the unknowns become known.”
• “Uncertainty on trade and world markets softening. 2019 will be an okay year, but we’re worried about the future.”
• “It depends on the political climate and sentiment.”
• “2019 will be an okay year, but we don’t know future trade restrictions and policies. Will Wilbur Ross leave as commerce secretary at the end of the year? Who will replace him? What will be their next restriction? What about Mexico and Canada and Section 232? All unknowns.”
• “America continues to grow despite the gridlock on the hill and despite the administration’s trial and error approach to trade.”
• “Prices are stabilizing. Year-end inventory clean-up will be over as we head into the new year.”
• “We are experiencing improved business activities. However, we are still not near our full capacity.”
• “We’re trying to remain optimistic.”
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 righthand 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 lefthand 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 that are conducted twice per month. We display the index reading on a meter on the Home Page of our website for all to see. Currently, we send invitations to participate in our survey to more than 600 North American companies. Our normal response rate is approximately 110-150 companies. Of those responding to this week’s survey, 35 percent were manufacturers and 45 percent were service centers/distributors. The balance was 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.
Tim TriplettRead more from Tim Triplett
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