SMU Scrap Survey: Sentiment Indices decline

Current Sentiment Index

SMU’s Current Sentiment Index for scrap declined by six points to +65 in November from +71 the previous month. The index has yet to fall below +60 or crack +80 so far this year.

The current six-point sentiment drop is likely a result of the stagnation of scrap prices over the last few months. Dealers see winter ahead with scrap prices at the low end. How are they going to build inventory for the winter months without raising prices? If they raise prices to attract obsolescent flows and mill pricing does not improve, they lose money. If they don’t raise prices and the market moves up, they have little to sell.

Future Sentiment Index

SMU’s Future Sentiment Index for scrap slipped one point to +78 compared vs. October. Buyers remain more optimistic about the near-term future than they are about the current moment.

This index has not changed much throughout the year. The feeling expressed by steelmakers is the new year will be better for HRC and longs. If this does happen, the sentiment among the scrap trade is they may go along for the ride with higher prices and better margins. 

About SMU’s Scrap Sentiment

SMU’s Current and Future Scrap Sentiment Indices mirror the Steel Buyers’ Sentiment Indices in our flat-rolled steel survey. They are diffusion indices: readings above 50 indicate a more bullish outlook, while readings below 50 indicate a more bearish one.

Sentiment is only one of the indicators we measure. Our scrap survey, like our steel survey, is available only to premium members. If you would like to upgrade from executive to premium, please contact SMU account executive Luis Corona at luis.corona@crugroup.com. If you’re interested in participating in our scrap survey, please reach out to david@steelmarketupdate.com.