SMU Data and Models

SMU Steel Buyers Sentiment Index: Waiting for Sense of Direction

Written by Tim Triplett

Steel Market Update’s Steel Buyers Sentiment Index has seen little change since the beginning of the year as the market seeks a sense of direction. While still well within the “optimistic” range, the index has been on a downward trajectory for months. SMU is consistantly seeing both our Current Sentiment Index as well as our Future Sentiment Index at levels below what we were measuring one year ago. In early February 2018 Current and Future Sentiment were heading for a record highs. Again, we want to remind our readers that the indices are still well within the optimistic range and a long, long way from our record low of -85 measured in March 2009.

SMU will be on watch to see if early signs that steel prices have hit bottom and begun to rebound are reflected in more bullish buyers’ sentiment in the coming weeks.

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 year. While still on the optimistic side of the scale, the reading offers a sharp contrast to the +75 registered at this time last year. Measured as a 3MMA, Current Sentiment dipped slightly to 58.83 from 59.50 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’ responses show no change in their outlook. As a single data point, Future Sentiment registered +59, unchanged from mid-January. Measured as a 3MMA, the Future Index averaged 58.83, also unchanged and well below year-ago levels.

SMU Future Steel Buyers Sentiment Index

What Our Respondents Had to Say

“Market fundamentals are taking shape. Demand remains steady. We can see a good market if supply can be settled. A big issue is further import restrictions/trade cases and any next step in Section 232.”

“Much will be determined in the next few months. We’re watching closely the progress of the U.S. and China negotiation and how it can affect world economies.”

“We expect things to start moving fast with price increases coming for April.”

“Domestic mills’ price activity is making import activity very limited.”

“There are far too many selling below replacement cost.”

“If commodity prices continue to slide, our ability to succeed becomes difficult.”

“Should tariffs be added to our costs, we will not be competitive.”

“Uncertainty remains.”

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, 36 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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