SMU Data and Models
SMU Steel Buyers Sentiment Index Beginning to Trend Lower
Written by John Packard
November 20, 2014
Buyers and sellers of steel are beginning to feel the strain of reduced demand (whether seasonal or otherwise), stable to falling steel prices and a very competitive service center spot market which impacts distributors margins. The bottom line is those actively involved in the flat rolled steel industry in the United States and Canada are less optimistic about their company’s ability to be successful in the current market than they were just two weeks ago.
Steel Market Update (SMU) announced this afternoon that our SMU Steel Buyers Sentiment Index dropped by 10 points since the beginning of November. The SMU Sentiment Index was reported at +52 which is well within the optimistic range but down 16 points from the peak of the cycle achieved on August 7, 2014. Any reading in the positive (+) position indicates an optimistic view of the market. The higher the reading the more optimistic the industry is about their company’s ability to be successful in the current market environment.
We are not overly concerned about one data point. After setting record highs in August we saw our Sentiment Index drop to +53 during the first week in September before bouncing right back to +64 in the following two survey periods.
What is troubling is our three month moving average (3MMA) which has been on a downward trajectory since it peaked in the middle of September at +61.83. It has subsequently fallen to +61.17 in the middle of October and is now +59.0 the lowest point since mid-June 2014.
Future Sentiment Index Drops 2 Points
We also ask buyers and sellers of flat rolled steel what they think about their company’s ability to be successful three to six months into the future. At the beginning of November our Future Sentiment Index was +59 which was the first time in the history of our Index that the Future Index was lower than current (+62).
SMU Future Sentiment Index is currently at +57, down 2 points from the beginning of the month and 4 points lower than one month ago. One year our Future Sentiment Index was reported as being +45.
SMU Comment: Steel Market Update had hoped that the downward momentum was only mildly seasonal. However, with both our 3MMA and Future Sentiment Indexes showing signs of strain and now trending lower over a period of time it’s not giving us warm and fuzzy feelings and could mean that the markets in January and February could be much more difficult than we thought previously.
About the SMU Steel Buyers Sentiment Index:
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 (can only be seen when logged into the website).
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, 46 percent were manufacturing companies (up 2 percent from our last survey) and 40 percent were service centers/distributors (down 4 percent from our last survey). The balance of the respondents being made up of steel mills, trading companies and toll processors involved in the steel business.
Below is an interactive graphic of the Steel Market Update Steel Buyers Sentiment Index History, but it can only be seen when you are logged into the website and reading the newsletter online. If you need any assistance logging in or navigating the website, contact us at info@SteelMarketUpdate.com or 800-432-3475.
{amchart id=”109″ SMU Steel Buyers Sentiment Index- Survey}
John Packard
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