SMU key market indicators positive in August
Half of the 36 Key Steel Market Indicators released in August are historically positive, while only 19 percent are negative, and the balance fall within the normal range, in Steel Market Update’s view.
Along with May, when the data was about the same, this is the best outlook since we began our analysis in January 2010. Trends are still good with 70 percent of the key market indicators heading in a positive direction; this was down from 83 percent in March. Trends lead the present situation by about four months.
Please refer to Table 1 for our view of the present situation and the quantitative measure of trends. Readers should regard the color codes in the present situation column as a visual summary of the current market condition. The “Trend” columns of Table 1 are also color coded to give a quick visual appreciation of the direction in which the market is headed. All data included in this table was released in August. The month or specific date to which the data refers is shown in the second column from the far right. All data is the latest available as of Aug. 31, 2017.
The changes in the August data releases were as follows: Log steel product shipments were re-classified from neutral to positive when they exceeded the 1.8 million ton/month threshold. The supply situation for both long and sheet steel products is the sum of mill shipments to domestic locations and imports. This is a proxy for demand, and for long products has been classed as historically positive since February. The supply of sheet has been so classed in both July and August. There were no other changes in our view of the present situation based on the data released in August.
Figure 1 shows our monthly assessment of the present situation since January 2010 on a percentage basis. The number of indicators classified as positive peaked at 47.2 percent in October 2014 and steadily declined to 11.1 percent in the three months through January 2016. Beginning in February 2016, there was a steady increase in the number of indicators we consider to be positive through May 2017, when a new high of 50.0 percent was reached. June and July declined to 47.2 percent positive with a return to 50 percent in August. The combination of positive and neutral indicators at the end of March was the highest ever at 83.3 percent. April, May, July and August were all 80 percent by this measure.
In the four months October through January, there was a steady improvement in trends. There was a positive surge in February that was sustained in March and April, followed by a significant decline in both May and June and a partial recovery in July and August. Figure 2 shows the trend of the trends and the pre-recession situation at the far left of the chart. The proportion of indicators trending positive in both the July and August data was 69.4 percent, the same as May and up from 61.1 percent at the end of June. March, at 83.3 percent, is the best result since our data was first compiled.
Our observations about trends in the August data are as follows: On Friday, the second estimate of GDP in the second quarter was released and improved from 2.6 percent to 3.0 percent. In the General Economy section of Table 1, the Chicago Fed’s National Activity Index reversed direction and trended slightly negative. There were no changes in the direction of the trends of the SMU proprietary indexes. Both continued to trend negative. The steel buyers’ sentiment has declined from its all-time high in mid-March of 74.17 to 64.3 in mid-August, but is still historically very strong (Figure 3).