SMU Data and Models

SMU Steel Buyers Sentiment Index: Waning Optimism

Written by Tim Triplett

Steel Market Update’s Steel Buyers Sentiment Index, which has been on a downward trajectory for months, has shown no signs of changing direction so far in 2019. The SMU Index continues to be well within the “optimistic” range, but is not as high as what we saw one year ago and is flat compared to where we were in fourth-quarter 2018.

John Packard, Steel Market Update President and CEO, says, “Historically, we see the first quarter of the New Year as being the point when those involved in the flat rolled and plate markets are the most optimistic as they look at the year ahead of them. This year, concern over the slide in spot pricing on flat rolled and maybe even the stock market have taken a bit of the zing out of the step of those who buy and sell steel. Demand appears to be fine. Buyers are nervous and uncertainty leads to lower sentiment.”

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 single data points and as three-month moving averages (3MMAs) to smooth out the trend.

Current Sentiment measured as a single data point registered +58, unchanged from the beginning of the month. While still in the optimistic range, the reading offers a sharp contrast to the +78 registered at this time last year, which was the highest point in 2018. Measured as a 3MMA, Current Sentiment dipped slightly to 59.50 from 59.67 two weeks ago, the lowest reading in over two years.

SMU Steel Buyers Sentiment Index

Future Sentiment

Asked to assess their chances for success in three to six months, steel executives appear slightly less bullish. As a single data point, Future Sentiment registered +59, down 2 points from early January. Measured as a 3MMA, the Future Index averaged 59.83, up a point from the 58.83 at the beginning of the month. Again, as with Current Sentiment discussed above, the +59.83 (rounded to +60) is well below year-ago levels.

SMU Future Steel Buyers Sentiment Index

What Our Respondents Had to Say

“Uncertainty and trade restrictions loom high. Lots of risk in the steel industry these days.”

“Volumes are good, but margins are horrible.”

“Nobody is buying right now, waiting to see how far prices will continue to fall. I expect we are near the bottom and early February will be a buying spree!”

“As long as trade policy is made by temper tantrums and tweets, we are not comfortable making a long-term purchasing strategy.”

“Underlying economy and demand is still solid.”

“As long as demand remains steady, we will find a way. If that starts to slow down, then all bets are off.”

“As long as pricing does not continue to drop.”

“We need pricing to firm up.”

“More questions than answers.”

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, 34 percent were manufacturers and 48 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.

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