Steel buyers are feeling good about their prospects later this year, as this week’s Steel Market Update Future Sentiment Index saw its highest reading in more than two years at +66, a 13-point jump over the past two weeks. Current Sentiment, which saw a small, four-point bump to +68, is equally optimistic.
Every two weeks, SMU asks steel buyers how they view their company’s chances for success in the current environment, as well as three to six months in the future. Whether it’s the record-high steel prices, the change of administration in Washington, the surprisingly strong economy, the progress being made against the spread of COVID-19 or some combination of the above, most buyers are feeling positive about the market—even though steel prices are expected to peak soon.
Three-Month Moving Averages
Measured as a three-month moving average (3MMA), Current Sentiment hit +65.17, its highest reading since July 2018. The Future Sentiment 3MMA moved up to a strong 59.83.
What Respondents are Saying
Despite the bullish readings in SMU’s indexes, industry executives clearly have concerns about the months ahead:
“We see demand slowing in the industrial and commercial sector.”
“I am on the import side, and Section 232 has greatly limited our business.”
“As long as the market does not crash, we are going to be okay.”
“As long as customers pay us on time…”
“Only if we can find supply.”
“Lack of material impacts our production to meet customer needs. Opens door for non-U.S.-produced equipment to be sold into the U.S. market. Causes loss of domestic jobs.”
“Steel is too expensive at this point. The mills are hurting their customers with these high prices.”
“Distributors have to be very careful to ensure any metal bought at today’s sky-high prices is sold back to back with take-or-pay agreements. We’re not buying HR at $1,200 per ton on speculation, only for orders with firm shipment commitments and for customers who are creditworthy.”
“It would improve if Section 232 can be removed from Europe.”
“We will be very profitable until the market turns and the correction starts. If it’s gradual, we are all fine. If it drops like a rock, then we all give back our profits and go into survival mode again.”
“If pricing goes down to a reasonable level, I’ll feel a whole lot better about our ability to be successful.”
“It’s hard to predict the next three months let alone six months. But it should be okay.”
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.
By Tim Triplett, Tim@SteelMarketUpdate.com
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