Economy

Steel Buyers Seeing Lower Foreign Prices

January 7, 2014

Steel buyers are expecting general economic activity to remain unchanged to slightly better in the next six months. In the December ISM Steel Buyers Survey 63.6 percent expect conditions to remain the same while 36.4 percent of those surveyed expect improvement. This compares to 66.7 percent and 26.7 percent, respectively, last month. Sales and production rates are expected to improve, jumping from 33.3 percent in November to 54.5 percent in December.

More buyers expect to depend on off-shore sources in the next six months, up to 33.0 percent from 25 percent in November. Mills are offering prices that are well below domestic prices said 45.5 percent of steel buyers, up from just 6.7 percent in November. Foreign mills are also more active in seeking us business.

The short term outlook for the next three months shows 72.7 percent of steel buyers expecting the trend for incoming orders to stay the same. Inventory of tons on hand is higher by about 10 percent from Dec. 2012 levels said 45.5 percent of those surveyed while 36.4 percent said inventory is about the same. Tons on hand will cover shipping for the next 1-2 months for just over half of respondents and 2-3 months for 27.3 percent of respondents (up from 13.3 percent in November). Inventory levels compared to demand are just right for 54.5 percent of steel buyers surveyed and too high for 45.5 percent of (up from 6.7 percent in November). Steel buyers plan to reduce inventory in the next six months, accordingly.

The percentage of those working at their most efficient level of operation improved from 26.7 percent in November to 54.4 in December; 36.4 percent are still below efficient levels. Order levels are considered to low for most efficient operation for 45.5 percent of respondents.

Shipping levels are below those of three months ago but above those of 12 months ago. Selling prices for products was viewed as competitive for 72.7 percent of steel buyers, with 18.2 percent saying prices are weak or very weak.

No one reported workforce on short time or layoff in December and over 90 percent now plan to build or buy new manufacturing facilities within the next year. Just slightly over half expect to higher new people.

At present production rates with no new orders, current order book would last 1-2 months for 30 percent of steel buyers, 2-4 months for 50 percent, and over 6 months for 20 percent.