SMU Data and Models
SMU Steel Buyers Sentiment Index: Have We Seen the Peak?
Written by John Packard
April 20, 2017
The Steel Market Update (SMU) Steel Buyers Sentiment Index continues at very optimistic levels for those involved in the flat rolled steel industry in the United States and Canada. At the same time, our index is no longer making new high’s either as a single data point or on our three-month moving average (3MMA).
SMU Steel Buyers Sentiment Index measures how buyers and sellers of flat rolled steel feel about their company’s ability to be successful in the existing market environment (Current Sentiment) as well as three to six months into the future (Future Sentiment). We explain our point system at the end of this article but the short view is anything referenced as a positive (+) number is considered part of the optimistic portion of our index.
Looking at both indices, from a single data point perspective produced this week, both indices are being reported at +72.
Looking at the +72 from our Current Sentiment Index perspective it is -3 points lower than what we reported at the beginning of April 2017. It is +1 point better than one year ago.
SMU prefers to look at our data from a three-month moving average as this tends to smooth out the data and give us a better view of the trend. Up until this week, our Current Sentiment Index 3MMA had been trending higher going back to mid-November 2016. That trend stopped this week as our three-month moving average dropped from +74.17 to +74.00.
Steel Market Update is not crying “The sky is falling! The sky is falling!” The +74.00 is a very optimistic place for the industry to be right now. The question is will the 3MMA moderate around these levels or drop over an extended period of time?
Future Sentiment
As was discussed above, our Future Sentiment Index (single data point) is being reported as being +72. When looking at the three-month moving average our Future Sentiment Index is +73.00 down slightly from the beginning of April when it was measured at +73.33.
What Our Respondents are Saying
“A little cautious about momentum of macro economic demand, ref. auto.” Service center
“Very quiet. Coming off a strong first quarter but waiting for April to kick in. May be a lost month… – lots of uncertainty, way low inventory, pondering when it will be the right time to restock.” Service center
“Our inventory is still favorably priced compared to replacement cost.” Service center
“Would like less inventory than we currently have.” Service center
“2nd qtr strong – second half much weaker, future business in a slump.” 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 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, 37 percent were manufacturing and 48 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.
John Packard
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