Economy

ISM Steel Buyers Expecting Fewer New Orders in Next 3 Months

March 6, 2014

Steel buyers report a softening in new orders in the latest Institute for Supply Management (ISM) Steel Buyer’s Survey. Those who expect orders to increase over the next three months dropped to 27.3 from 42.9 percent in January, 18 percent expect orders to decline, and 54.5 percent expect levels to remain the same. Current incoming orders are less than needed for efficient operation according to 36.4 percent of steel buyers and at the right level for 45.5 percent.

Current tons on hand will cover less than one month for 36.4 percent of buyers, 1-2 months for 45.5 percent and 2-4 months for 18.2 percent. Tons on hand are the same or somewhat higher than levels from 12 months ago.

Inventory compared to demand is considered too high by 36.4 percent (up from 28.6 in January) and about right for 54.5 percent of those surveyed. Approximately 36 percent of those surveyed said they plan to reduce inventory over the next six months.

Current shipping levels are above those of three months ago according to 27.3 percent of buyers, up from 14.3 percent the previous month. Buyers are split evenly at 36.4 percent on whether shipping levels are higher or lower than 12 months ago.

At present production rates and with no new orders, current book orders would last 1-2 months for 54.5 percent of buyers. For the rest of the buyers surveyed, 18.2 percent said 2-4 months, 18.2 percent said 4-6 months, and 9.1 percent said 6 months or more.

Selling prices were viewed as competitive. Most (72.7 percent) expect backlogs to remain the same over the next 3 months, but 18.2 percent, up from 14.3 percent in January, expect a decrease in backlogs.

Looking at the six month outlook, economic activity is expected to remain the same said most steel buyers. The six month trend for buyers’ industry specific sales and production is expected to rise or remain the same.

Most expect dependence on off-shore sources to remain the same for the next six months. The discrepancy between foreign mill and domestic prices is weakening with just 36.4 percent of buyers reporting foreign prices below domestic levels, down from 57.2 percent in January.

Fewer buyers say their company plans to hire new people, 27.3 percent compared to 50 percent in January. Most have no plans to build or buy new manufacturing facilities within the next year.