SMU Steel Buyers Sentiment Index: Market's Anxious

Steel Market Update’s preference is to look at the data based on a three-month moving average (3MMA). This smooths out the index and provides a better look at the true trend. The Current Sentiment 3MMA is at +67.50, down from +70.67 a month ago. The 3MMA continues the slight slide it has seen since peaking at +74.17 in the first week of April.

Future Sentiment, which is how flat roll buyers and sellers see their company’s chances for success three to six months into the future, registered +65, up just 1 point from the early July survey, which was the weakest Future Sentiment number since mid-November 2016.

Looking at Future Sentiment as a three-month moving average takes some of the volatility out of the index. As a 3MMA, the index registered +67.33, down from +69.83 a month ago. That continues to be well within the optimistic parameters of the index and is above the +65.50 measured one year ago.

What Respondents are Saying

The debate in Washington over Section 232 and possible trade actions that will further restrict imports is a common cause for concern among respondents. “We’re fearful if 232 is enacted in either a quota or duty, the domestic mills will think they can raise prices substantially and we will stall the market,” commented one service center executive. “It seems evident that the 232 trade investigation will result in higher costs for manufacturers and make U.S. products less competitive, and higher costs for consumers,” said one trader. “The mills have no incentive to lower their prices. There’s no foreign competition to speak of right now. Their books are full and the lead time is extending. I think everybody is waiting on 232 to know what to do next,” added a manufacturer.

The longer the wait for a decision on Section 232, the more likely suppliers will act, said other respondents. “The mills can’t handle this waiting game, so prices are going to move up one way or another. I think near the end of this week, unless something newsworthy hits to stop them,” predicted a service center executive. His prognostication proved accurate with the new announcements by Nucor, NLMK and ArcelorMittal of flat roll price hikes.

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 that are conducted twice per month. We display the index reading on a meter on the Home Page of our website for all to see. 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, 39 percent were manufacturers and 45 percent were service centers/distributors. The balance was 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.