SMU Data and Models
SMU Steel Buyers Sentiment Index Continues Optimistic Trend
Written by John Packard
July 24, 2014
Even though our Steel Market Update Steel Buyers Sentiment Index dropped 3 points to +62 this week, it is still well within the optimistic range and close to the record high which was set at the beginning of this month. This continued optimism is reflected when looking at Sentiment based on a 3-month moving average (3MMA). Our 3MMA set a new record high of +59.88, up 0.66 points from the beginning of this month.
The level of optimism is clear when looking at where our Index was one year ago. At that time the SMU Sentiment Index was +37 or 25 points below our current level. The 3 month moving average was also much lower last year having been measured at +27.67.
Our opinion is the optimistic attitudes are related to firm pricing in the marketplace out of the domestic steel mills. Firm prices favor inventory values and selling prices. We are seeing this reflected in the comments we received from both manufacturers and service centers regarding service center spot prices which continue to be positive as distributors are either keeping prices the same or attempting to raise prices modestly.
Demand is a second area measured by our survey where we are clearly seeing an optimistic trend. We had 41 percent of the total respondents reporting improving demand for their products and only 1 percent reported demand as weakening.
One of our service center respondents reported having inventory holes developing which would drive spot pricing, “We are starting to see inventory holes develop – even within our walls. This will drive spot pricing upward for the balance of third quarter, maybe even the balance of the year.”
We also had a number of comments left during the survey process indicating the resolution of the OCTG trade case (oil country tubular goods) is a positive development for the steel industry.
Future Sentiment Index
SMU Future Steel Buyers Sentiment Index was measured at +74 which is a record high for the index. Future Sentiment measures how buyers and sellers of steel feel about their company’s ability to be successful in the market 3 to 6 months into the future. The +74 was up 8 points from the beginning of July. One year ago it was +46.
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 participate in our survey to almost 600 North American companies. Our normal response rate is approximately 110-170 companies. Of those responding to this week’s survey, 44 percent were manufacturing companies (up 3 percent from the 41 percent reported in our last survey) and 42 percent were service centers/distributors (down 3 percent from the 45 percent reported in our last survey). The balance of the respondents are made up of steel mills, trading companies and toll processors involved in the steel business.
Below is an interactive graph of our Sentiment Index (open white space if you are not on our website). In order to see and manipulate the graph you will need to be logged in on the SMU website. Contact us at: info@SteelMarketUpdate.com or by phone at 800-432-3475 if you need assistance.
{amchart id=”109″ SMU Steel Buyers Sentiment Index- Survey}
John Packard
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