Comments Provided to SMU During Last Week’s Survey
“Demand is down 40%. Construction industry related. Backlog is down 50%, still haven't seen the bottom of work decline. Large amount of price competition as industry is winnowed down to smaller size. Reducing commitment to inventory. Companies are going to fail, as end prices can't increase due to oversupply while the mills increase their prices. Ironically, this will then bring supply and demand back in line and give the industry more pricing power. But it's going to be a hard six months.” From a construction related manufacturing company who rated business a “2” on the 1-10 scale. By the way, we had to use the dictionary on this one – “winnowed: narrow or reduce (the field of contenders)” Webster Dictionary.
“Stable is not accurate. Demand is still at extremely low levels. No signs of increased demand. They [domestic steel mills] will collect partial increase only.” This is from a service center which rated business a “2”.
“Customer just trying to beat prices increases and filling in gaps [demand growing in 1Q vs. 4Q]. Needs to be priced right [are you increasing steel purchases?]. Yes - We are having to look at multiple suppliers before we are able to cover our needs [buys steel from service centers not mills].” This service center rated their business a “6” on the 1-10 scale.
“We have increased some just for spring, but only to avoid some of the typical bottlenecks at the mills not to hedge pricing. Demand still not that strong [is your company increasing steel purchases?]. We are negotiating with foreign sources now for May arrival material. They [domestic steel mills] will collect partial increase only. Demand is just not strong enough. Construction customers will still be burning off cheap steel purchased in Jan come March. Temps in south have affected business, hopefully will rebound some if we get back into a more normal temp range.” Construction related manufacturer who rated business a “4”.
Anticipate costs going higher so need to get ahead of the curve. Not expecting demand to improve. Prices are looking more attractive. Considering purchasing small quantities [is buying foreign steel an option?]. Service center who rated business a “5”.
“The last 6-weeks of 2009 nothing was happening. Commencing with Monday morning 01-04-10 the activity is much improved. We'll see how long this lasts [Current demand]. To be in a position to be able to service our marketplace as business starts to recover post 2009 levels [increasing steel purchases?]. The bar was set so low in 2009 any improvement is welcomed [business conditions today are fair]. West Coast service center who rated business a “6”.
“January looks strong up over 10% will run over into Feb. do not have a good feel for Mar. as yet. Not enough difference in price to justify risk [foreign steel an option?]. Wish I knew for sure that would change buying patterns [will domestic mills collect price increases?]. This Midwest service center rated business a “5”.
“I am going to see if I can tie up steel to cover demand for May and June. We would not bring the steel in until we needed it. I am just trying to expand on my current buy [your company increasing steel purchases?]. Just so you understand the less than 1 month. We have a make and hold program with our steel vendors. Internally we work from a lean supermarket so we pull as we need the steel. the vendor processes 30 days ahead [advised SMU they had less than 1 month of inventory on their floor]. I did have a service center that lost about 10 truck loads of steel. The mill pulled the orders back just before they were due to ship. My guess is the mill used the tonnage to fill a contract order that they were behind on [they look at multiple service center suppliers to cover their needs]. My last buy was in mid November. Pricing being quoted today is about 13% higher. (.023 min galv) [have prices from service centers increased?]. Lead time doesn't work for us. Pricing is still too high [is foreign steel of interest?]. The mills are on a roll right now and the momentum is in their favor for now. I don't believe that it will be sustainable over the long haul. But it is what it is for the time being [will mills collect their price increases?]. This company is a large manufacturer and rated business a “5”.
Just to reconfirm what we published on Friday – the last question on our Market Survey asks: On a scale of 1 to 10 - 1 being the worst and ten the best -How would you describe business conditions at this time? The average of all the responses was 4.41.
SMU Buyers Sentiment was measured at -21.6% which is the highest reading since we began measuring Sentiment in November 2008. SMU Future Sentiment was +16.4% and has been in the “optimistic” range for the past two months – although last week’s reading was lower than the one taken the first week of January. For more information about the SMU Buyers Sentiment Meter go to www.steelmarketupdate.com where both our Meter and Price Momentum Indicator can be found on our Home Page.