SMU Data and Models

SMU Sentiment Index Still Optimistic Despite Harsh Winter Weather

February 6, 2014

Steel Market Update (SMU) began collecting responses earlier this week from the just shy 600 companies invited to participate in our twice monthly flat rolled steel market analysis. The individuals responding to our questions this week – particularly those related to our SMU Steel Buyers Sentiment Index – were being influenced by weather related issues around the country. Even so, our Buyers Sentiment Index was measured at +40 this week. Although down 4 points from our last measurement which was made during the middle of January, Sentiment is clearly rooted in an strong optimistic trend which began in the middle of June 2013 when Sentiment jumped from +22 (and lower in prior months) to +35 and has averaged +39 ever since.

The three month moving average (3MMA) is +39.33 a one point improvement from one month ago and 1.5 points better than two months ago. One year ago SMU Steel Buyers Sentiment Index was recorded at +27 and was trending lower. To view a history of the SMU Steel Buyers Sentiment Index click here.

SMU Future Steel Buyers Sentiment Index, which measures how individuals within the flat rolled steel industry feel about their company’s ability to be successful three to six months from today, was measured at +50 which is down three points from mid-January. Last year at this time Future Sentiment was reported to be +43.

What is preventing the Index from moving even higher appear to be related to weather issues – particularly in the Midwest and Northeastern sections of the United States. As well as early signs of slipping flat rolled spot prices which impacts the value of inventories and complicates the selling process. We are also reminded that the construction industries, although improved are still a long way from being back to pre-2007 levels.

A number of service centers/wholesalers cited shrinking margins due to higher costs and irresponsible competition as reasons for not being more optimistic about business trends.

What respondents are saying:

“Mother Nature is having her way right now, when she’s done, business will improve.”

“Damaged January sales due to heavy weather.”

“Inclement weather in the Midwest has hurt.”

“Things have slowed down quite a bit. Plus the bad weather in the Northeast has hampered deliveries.”

“Business is] Fair to Good, need residential construction to recover.”

“Unfortunately steel service centers continue to sell off cost. Any advantage to blending foreign with domestic is lost to the same pricing stupidity that managers allow their field sales team to execute.”

“Profits are getting squeezed –steel costs are up, minimum wage is going up and our customers want lower guaranteed pricing for 6 months minimum.”

About the SMU Steel Buyers Sentiment Indices

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 right hand 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 left hand 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 which are conducted twice per month. We display the index reading on a meter on the Home Page of our website for all to enjoy.

Currently we send invitations to approximately 600 North American companies to participate in our survey. Our normal response rate is approximately 3120-170 companies. Of those responding to this week’s survey, 43 percent were manufacturing companies and 42 percent were service centers/distributors. The balance of respondents were made up of steel mills, trading companies and toll processors involved in the steel business.

Steel Market Update does canvass those being invited to participate in order to confirm their active participation in the flat rolled steel business. Our list is updated at least once per month and we are adding new companies on a continuous basis.