SMU Data and Models

SMU Steel Buyers Sentiment: Surprisingly Optimistic

October 18, 2020

Given all the contentious election rhetoric and concerns over the spread of COVID, industry sentiment, as measured by Steel Market Update, remains surprisingly upbeat. SMU’s Current Sentiment Index saw a 12-point jump since the beginning of October, reaching its highest reading since May 2018.

Every two weeks, SMU asks steel buyers how they view their company’s chances for success in the current environment. The Current Sentiment reading jumped to +68 this week, up from +56 early in the month. Compared with the first week of April, when the market was in shock over the coronavirus and the index hit a 2020 low of -8, that’s a 76-point improvement. Current sentiment today is twice as optimistic as it was at this time last year when concern over sub-$500 hot rolled steel prices drove the index to a lowly +32.

Future Sentiment

SMU also asks buyers how they view their company’s chances for success three to six months in the future. SMU’s Future Sentiment Index registered a healthy +57 this week, up from a low of +10 back in April. Future Sentiment has been stable in the mid-50s through September and October.

To offer further context, the worst sentiment reading every recorded by SMU was -85 in March 2009 when the economy was struggling to recover from the Great Recession. Outside the recessionary years of 2008-10, both Current and Future Sentiment had remained in positive territory until the coronavirus struck this year. The most optimistic industry sentiment has ever measured was +78 in January 2018.

Three-Month Moving Averages

Measured as a three-month moving average (3MMA) to smooth out the monthly variability, Current Sentiment measures +54.17 and Future Sentiment +51.50. That’s approaching but still below the pre-pandemic levels of +58.17 and 59.17, respectively.

What Respondents Had to Say

“I’m feeling good about the current market conditions.”

“Sales will be very profitable for what we have, but limited available inventory will hold down volume.”

“I feel there will be a substantial market correction near the beginning of 2021, as it will again become a buyer’s market as demand slows and supply catches up.”

“This is not going to last!”

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 100-150 companies; approximately 40 percent are manufacturers, 45 percent are service centers/distributors, and 15 percent are steel mills, trading companies or 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.