SMU Data and Models

SMU Steel Buyers Sentiment Index is Bucking Pessimistic Trend

January 21, 2016

Buyers and sellers of flat rolled steel are beginning to feel more optimistic about their company’s ability to be successful both in the current market environment as well as three to six months out into the future. Those in the industry seem to be bucking the national pessimistic trend we see on television every night (see Philly Fed article in tonight’s issue) and in the stock market.

Steel Market Update (SMU) believes that the December and early January domestic mill flat rolled price increase announcements have helped firm up margins at service centers. We also believe shrinking inventories are assisting in the development of a more positive (optimistic) attitude in the flat rolled steel community.

Twice per month Steel Market Update (SMU) canvasses buyers and sellers of flat rolled steels on a wide variety of topics. One area we probe is how they feel about their individual company’s ability to be successful in today’s economy (Current Sentiment) as well as what they think business conditions will look like three to six months into the future (Future Sentiment). We will have a full explanation about our index at the end of this article.

Here are the “snapshot” numbers:

SMU Current Sentiment rose +12 points and is being reported this week at +56.The +56 is the most optimistic reading we have seen since the beginning of August. It is also the exact same number we reported for mid-January 2015.

SMU Future Sentiment rose +2 points to +63 which is the most optimistic we have seen this segment of our index since the beginning of July 2015.

3MMA Tells the Story

We prefer to look at the 3 month moving average as being more telling when it comes to seeing what changes there are in the trend. Both our Current and Future Sentiment Indices (3MMA) have broken out of the less optimistic slide that developed in the early summer months and continued through the end of the year.

Current Steel Buyers Sentiment Index (3MMA) broke out of the slide at the beginning of January and with the most recent data is now up for the second time this year at +41.67.

Future Steel Buyers Sentiment Index (3MMA) also broke out of the negative slide at the beginning of January 2016 and is now being reported at +53, up 3.67 points since the beginning of the month.

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 all to enjoy.

Currently, we send invitations to participate in our survey to almost 600 North American companies. Our normal response rate is approximately 100-170 companies. Of those responding to this week’s survey, 46 percent were manufacturing and 40 percent were service centers/distributors. The balance of the respondents are made up of steel mills, trading companies and toll processors involved in the steel business.

Click here to view an interactive graphic of the SMU Steel Buyers Sentiment Index or the SMU Future Steel Buyers Sentiment Index.