Economy

Steel Buyers Optimistic About New Orders—More Dependent on Foreign Mills

April 15, 2014

More than half of steel buyers in the March Institute for Supply Management (ISM) Steel Buyers Survey are expecting incoming orders to rise in the next three months. The percentage rose from 27.3 in February to 53.3 in March with the rest expecting the order trend to remain the same. Backlogs are expected to remain the same for 60 percent of buyers while 33.3 percent (up from 9.1 percent) expect backlogs to increase. Receipts are forecast to remain the same or increase over the next three months.

Current tons on hand would cover current shipping levels for 0-1 month for 40 percent of buyers, 1-2 months for 33.3 percent, 2-3 months for 20 percent, and 3-4 months for 9.1 percent. Compared to 12 months ago, 46.7 percent say tons on hand are about the same and 33.3 percent say levels are 10 percent higher. Inventories compared to demand are considered too high by 40 percent of those surveyed and just right for 60 percent of buyers. Buyers plan to adjust inventory accordingly.

Shipping levels compared to three months ago are about the same the same for most buyers but higher for 33.3 percent. Compared to 12 months ago, current shipping levels are higher for 60 percent of buyers.

Selling prices are viewed as competitive by 73.3 percent with the remaining buyers saying prices are weak or very weak. Current order books with no new orders would last 1-2 months for 46.2 percent of buyers, 2-4 months for 30.8 percent, 4-6 months for 7.7 percent, and 6 or more months for 15.4 percent of buyers. Incoming orders in March were below most efficient levels for 46.7 percent of buyers.

A third of buyers say general economic activity will rise in the next six months and the rest predict it to remain the same. During the next six months the trend of sales and production in buyer’s industries are expected to rise for 33.3 percent and remain the same for the rest.

Buyers reported that they will depend on more on off off-shore sources over the next six months. More than 50 percent of buyers say foreign mill prices are below domestic price. Foreign mills are also seen as somewhat more aggressive in seeking US business.

Employment levels may rise slightly with 53.3 percent planning new hires, up from 27.3 percent in February. Only 6.7 percent of steel buyers have workforce on short time or layoff. Only 13.3 percent plan to build or buy new manufacturing facilities within the next year.