Economy

ISM Steel Buyers Tempted by Foreign Prices

December 6, 2014

Steel buyers in the November ISM Steel Buyers Survey are expecting general economic activity and sales and production to remain at current levels for the next six months. Eighty percent of buyers said general economic activity will remain the same while 90 percent expect the trend for sales and production in their industry to be unchanged.

For the short term three month period, the trend for incoming orders is expected to increase for 20 percent of buyers, stay the same for 50 percent, and decrease for 30 percent. Backlogs for the next three months are expected to increase said 20 percent of those surveyed, up from 8.3 percent in October. Of the remaining buyers, 50 percent expect backlogs to remain the same and 30 percent predict a decrease (up from 16.7 percent the previous month).

When asked about imports, 37.5 percent of buyers said they are likely to increase their dependence on off-shore sources compared to 22.2 percent in October. Fifty percent of buyers reported foreign mill prices are below or well below domestic prices. Foreign mills were viewed as more aggressively seeking US business by 40 percent of those surveyed, up from 25 percent in October.

Inventories increased in the November survey with 20 percent reporting tons on hand would cover shipping levels for 0-1 months, 60 percent for 1-2 months and 20 percent 2-3 months (up from 8.3 percent). Compared to 12 months ago, 50 percent reported higher inventory levels while 40 percent said that levels were similar to one year ago. Sixty percent of buyers said they would maintain current inventory levels for the next six months while 40 percent plan to reduce levels.

Shipping levels were about the same as three months ago for 60 percent of buyers, but 20 percent reported shipping levels had decreased. The last time any buyers reported shipping levels down from the previous three months was in June 2014 by 8.3 percent, preceded by 18.2 percent in February. Compared to 12 months ago, 60 percent felt current shipping levels were higher and 30 percent the same.

At present production rates and with no new orders, current order books would last 1-2 months for 50 percent of buyers, 2-4 months for 30 percent and 6 months or more for 20 percent.

For the fifth month in a row no one reported any workforce on short time or lay-off. Seventy percent said they are currently hiring new people or plan to. Investment plans are once again optimistic with 80 percent planning to build or buy new manufacturing facilities within the next year.