SMU Buyers Sentiment Index Jumps to 5-Month High

SMU’s Current Buyers Sentiment Index rose to +67, up 13 points from our previous market check and up 12 points compared to levels one month ago (Figure 1). This is the highest recording since June, when it had reached +70. Prior to last week, Current Buyers Sentiment had bounced around the mid/low +50s since mid-September. Recall that sentiment briefly slipped to a two-year low of +43 in mid-July, down from a peak of +82 in March. The last time Current Sentiment saw a survey-to-survey change this large was in early August, when it recovered 23 points from the late July low.

SMU’s Future Buyers Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. Future Sentiment increased three points from our previous survey, and now stands at +69. Future sentiment is back in line with levels seen one month ago, tied with that previous reading for the highest level recorded since May (Figure 2). Future Sentiment has fluctuated between +53 and +69 over the last quarter. Recall we saw the highest Future Sentiment readings in our 13.5-year history earlier this year: late April and early May both registered +80. Back in mid-July, Future Sentiment fell to a nearly two-year low of +43.

Recall that as steel prices peaked in September 2021, Current Sentiment reached an all-time high of +84. 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 inched up half a point to +56.00 this week. This measure has overall trended downward since May (Figure 3). Two weeks prior we saw the lowest Current Sentiment 3MMA since mid-October 2020 when it was +54.17. Six months ago, the Current Sentiment 3MMA peaked at +77.83, the highest level since December 2021.

The Future Sentiment 3MMA increased again this week to +63.83, almost two and a half points higher than one month prior (Figure 4). Unlike the Current Sentiment 3MMA, the Future 3MMA has shown signs of recovery over the last four surveys. The early September reading of +55.33 was the lowest seen since October 2020. The Future Sentiment 3MMA has risen in each survey since and is now at the highest level since early July. Recall that the Future Sentiment 3MMA had reached a record high of +74.67 in May, surpassing the previous record of +73.67 set in March 2017.

To analyze the magnitude of Sentiment movements, we measure the survey-to-survey change in the Current Sentiment Index (Figure 5). On a 3MMA basis through last week, the survey-to-survey change is up half a point compared to two weeks earlier. Prior to this survey, we had seen negative growth rates in all but one survey since early June. In late July, we saw a six-point decline, which was the largest change seen since April 2020. Between November 2020 and June 2022, the survey-to-survey change in our 3MMA Sentiment reading was relatively stable, never exceeding two points. In late June of this year, it began to exceed that range and did so through July.

What SMU Survey Respondents Had to Say:

“We remain optimistic, as our backlog is still looking very strong.”

“Our inventory costs are finally coming down.”

“We forecasted ~15% less revenue this year and it’s as planned.”

“Finding people that show up is the #1 item to staying in business.”

“Buyers have stopped taking steel.”

“We will finally hit bottom in general and prices should recover and buying return.”

“We should see markets recover in the three-month time frame.”

“We will get our share of our market. It is a price game.”

About the SMU Steel Buyers Sentiment Index

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

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 SMU surveys that are conducted twice per month.

We send invitations to participate in our survey to more than 700 North American companies. Approximately 45% of respondents are service centers/distributors, 30% 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