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Conditions Make Steel Buyers Optimistic

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Service centers and other steel buyers are optimistic about current market conditions, according to May's SMU Steel Buyers Sentiment Index, which hit an all-time high last month. Steel Market Update reports that flat-rolled steel buyers feel increasingly positive about their companies’ ability to be successful as business conditions continue to improve in most market segments.

SMU's index hit +62 in mid-May out of a possible +100, the most optimistic reading it has ever recorded. Since the beginning of the calendar year, sentiment improved by 19 points. To give that figure some perspective, sentiment was measured at -85 back in the recessionary period of March 2009, the most pessimism the index has ever recorded.

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. Readings are developed through Steel Market Update market surveys. Twice each month, SMU conducts an online poll of nearly 600 North American companies, including manufacturers, service centers/distributors, toll processors, steel mills and traders. The survey typically has a 20-30 percent response rate.

Industry sentiment has improved for the past 17 months, with the trend firmly taking hold a year ago (see chart). SMU's three-month moving average, an even better indicator of trend, also has improved. After averaging +39.33 early this year, the 3MMA has moved to its current level of +50.33—also an all-time high.

Based on the survey results, one of the driving factors of improved optimism is a positive attitude regarding growing demand. In addition, steel prices are high enough to create value for most companies holding inventories, and service centers are able to collect higher spot prices. No manufacturing companies reported declining spot pricing from their distributors.

Steel industry veteran John Packard is publisher of the Steel Market Update e-newsletter, a provider of flat-rolled steel industry news, pricing, market trends and educational services. SMU also conducts training programs such as Managing Price Risk II: Strategies and Execution, and Steel 101: Introduction to Steelmaking & Market Fundamentals. SMU will host its Forecasting & Steel Summit Conference in Atlanta on Sept. 3-4. For more information, visit