SMU Steel Buyers Sentiment Index Tumbles to Near 2-Year Low

SMU’s Future Buyers Sentiment Index, which measures buyers’ feelings about business conditions three to six months in the future, fell 11 points to +43 (Figure 2). Future sentiment was last this low in August 2020. Just a few months ago, we saw record high Future Sentiment readings. The highest recorded in our 13.5-year history were in April and early May.

Recall that as steel prices peaked last September, Current Sentiment reached an all-time high of +84, while Future Sentiment peaked two months later at +78. The lowest levels over the past decade both occurred in April 2020, at -8 and +10 respectively.

Measured as a three-month moving average, the Current Sentiment 3MMA slipped six points to +63.33 last week, a decline of nine points compared to one month prior (Figure 3). Eight weeks ago, the Current Sentiment 3MMA peaked at +77.83, the highest level since December 2021.

The Future Sentiment 3MMA also declined six points this week to +59.33, down ten points from one month prior (Figure 4). Back in May, the Future Sentiment 3MMA reached a record high of +74.67, surpassing the previous record of +73.67 in March 2017.

One helpful way to measure changes in Sentiment is to graph the survey-to-survey change in the Current Sentiment 3MMA Index (Figure 5). The latest 3MMA is down six points compared to early July, the largest survey-to-survey change seen since April 2020. Between November 2020 and June 2022, this change was steady, never exceeding two points. In late June, it began to exceed that range and has in each survey since.

What SMU Survey Respondents Had to Say

“Things are getting tough – classic down market where our inventory is starting to be upside down versus the spot market.”

“I don’t see any positive changes in the near term. Looks almost worse longer term”

“We have a strong backlog into the 4th quarter with confidence we will fill out the rest of the year soon.”

“We need to manage our supply chain as tightly as possible in this market.”

“The margin pressure is very real, and labor costs just continue to escalate. A rough one-two punch in the SSC sector.”

“In a good position to service the market when any upside returns.”

“Losing money on every order due to high cost of inventory.”

“I am a huge steel bull, but this market has me worried. Color me ‘pessimistic’ right now.”

“Much can change six months from now. (The) crystal ball gets murky, but should still be good.”

Tracking steel buyers’ sentiment is helpful in predicting their future behavior.

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 run from +10 to +100. A positive reading means the meter on the right-hand side of our home page will fall in the green area indicating optimistic sentiment. Negative readings run from -10 to -100. They result in the meter on our homepage trending into the red, indicating 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. Sentiment is measured via Steel Market Update surveys that are conducted twice per month. We display the meter on our home page.

We send invitations to participate in our survey to more than 700 North American companies. Approximately 45 percent of respondents are service centers/distributors, 30 percent are manufacturers, and the remainder are steel mills, trading companies or 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.

By Brett Linton, Brett@SteelMarketUpdate.com