SMU Data and Models

SMU Steel Buyers Sentiment Index 3MMA Continues to Slide

January 8, 2015

The first measurement of our Steel Buyers Sentiment Index in the New Year provided us some mixed results. Current Sentiment, which is how steel buyers and sellers feel about their company’s ability to be successful in the current market environment, was measured at +54. This is well within the optimistic range of our Index but down 2 points from two weeks ago. One year ago current Sentiment was +43.

We like to smooth out the numbers in order to better see any trends as they develop. We use a three month moving average (3MMA) which adjusted our Index to +55.83, much lower than the +58.83 we saw at the beginning of December. Looking back at the 3MMA since the beginning of October we have: +61.67 (Oct), +60.17 (Nov), +58.83 (Dec) and now +55.83 (Jan). As you can see the trend over the past 3 months has been optimistic but waning from one month to the next. Sentiment is still well above year ago levels when our 3MMA was +38.33.

The erosion in Current Sentiment is of concern and we feel is related to building inventories, the crash of the energy markets and continued pressure on pricing (and margins). However, demand continues to be very good with no surprises (except in the energy field where lower oil prices have dramatically impacted pipe & tube suppliers) and a optimism in gaining strength in the commercial construction markets.

Below is our interactive graphic which can be seen when reading the newsletter online (log in required).

{amchart id=”109″ SMU Steel Buyers Sentiment Index- Survey}

Future Sentiment Index Close to Record High

Steel Market Update also produces our Future Sentiment Index which measures how buyers and sellers of steel feel about their company’s ability to be successful three to six months into the future. This week we measured Future Sentiment at +70 which is a +12 point improvement from mid-December 2014 and +9 points more optimistic than what we saw at the beginning of December. One year ago Future Sentiment was +55. The most optimistic reading we have was from mid-July 2014 at +74.

Below is our interactive graphic which can only be seen when reading the newsletter online (log in required).

{amchart id=”108″ SMU Steel Buyers Future Sentiment Index- Survey}

What Our Respondents Are Saying

“Everything is weather dependent, but heading into 2015, this is the most optimistic I’ve seen metal construction in a long time.” Service center.

“Customers are sitting on the side line.” Trading company.

“Demand is better, pricing is very difficult.” This manufacturing company then went on to say, “We have done the right things to position our team for the future.”

“Plate fabrication is expected to grow through 2015 due to infrastructure projects scheduled in North America and overseas. North American suppliers should see improvement in this segment due to their product offerings.” Steel mill.

“If it wasn’t for Q1 challenges of weather and a somewhat tight backlog in that time frame, I’d go with Excellent. Demand after Q1 is already strong.” Manufacturing company.

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.

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 our members 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 (down 2 percent from our last survey) and 41 percent were service centers/distributors (up 1 percent from our last survey). The balance of the respondents are made up of steel mills, trading companies and toll processors involved in the steel business.