Steel market sentiment refers to the overall attitude and expectations of market participants regarding the future direction of steel prices, demand, supply, and other critical factors impacting the industry. Monitoring steel market sentiment helps businesses make informed decisions about purchasing, selling, investing, and managing risk. In addition, steel pricing in Mexico can effect the volume and pricing of import and export of steel to the United States. In this article, we analyze the recent S&P Global Commodity Insights steel sentiment survey results for the Mexican steel market.
S&P Global Commodity Insights Steel Sentiment Survey
Participants
This monthly survey gathered insights from various market players, including service centers, distributors, profile sellers, producers, scrap dealers, and consumers. These diverse perspectives offer valuable insights into the dynamics of the Mexican steel market.
Methodology
Respondents provide answers on a scale of 0-100, measuring their views on different aspects of the steel market. For instance, an index reading below 50 implies pessimism or expected decreases, whereas values exceeding 50 indicate optimism or anticipated growth.
Price Sentiment Turns Bearish
The latest survey revealed that pricing sentiment for the Mexican steel market in February 2023 has turned decidedly bearish. All market participants expect price decreases, causing the index for price stability to plunge to 38.4—far lower than January’s figure of 52.9. Clearly, this downward trend suggests challenging times ahead for the industry.
Expected Decrease By Market Participants
Market participants anticipate varying degrees of price reductions, as shown in the table below:
| Respondent Group | Index for Price Stability | Anticipated Decrease |
|---|---|---|
| Producers | 41.6 | Smallest |
| Service Centers | 36.11 | Largest |
Producers foresee the smallest decrease compared to other group, indicating potential resilience despite the prevailing downturn. Meanwhile, service centers predict the steepest price declines among market participants.
Production Expectations Drop
Beyond just pricing sentiment, the survey found that expectations around finished steel production also declined significantly. On average, respondents predicted a drop in production, reflected in an index of 46.61. However, producer respondents differed markedly from others, forecasting higher output with an index of 52.03. This discrepancy highlights divergent opinions on future production capacity.
Inventory Levels
Long Steel Products
Survey responses indicated that most respondents had limited supplies of long steel products, with approximately 55.55% holding stock for fewer than 15 days. Only one respondent reported inventory lasting beyond 30 days.
Flat Steel Products
Conversely, respondents held ample flat steel product inventory. About 69.2% possessed stocks for 46 days or more, while merely 7.7% maintained inventory for fewer than 15 days.
Raw Material Cost Expectations
Expectations for raw materials followed suit, turning increasingly negative. With an index of 39.37, all respondents foresaw further cost reductions. Specifically, prices for busheling scrap ranged from Peso 7,500 – 7,900 per metric tonne (FOB). Similarly, industrial return rates fluctuated from Peso 6,700 – 8,500 per metric tonne (FOB).
Analysis Of Survey Results
Various reasons contribute to the Mexican steel market’s gloomy forecast, such as economic factors, government policies, and international trade tensions. Here, we delve deeper into some primary drivers behind the bearish sentiments.
Economic Factors
Economic indicators, including inflation, interest rates, unemployment, and gross domestic product (GDP), influence the steel market. Mexico exports to the United States and Canada, making it vulnerable to macroeconomic shifts in those countries. Moreover, rising energy costs and labor disputes exacerbate pressures faced by local manufacturers.
Government Policies
Domestic regulations play a crucial role in shaping the steel sector. Changes in environmental policies, taxation, and subsidy programs might affect the profitability and competitiveness of firms operating within the country. Furthermore, geopolitical risks associated with regional conflicts could disrupt supply chains and impede cross-border transactions.
International Trade Tensions
International trade relations shape the flow of goods and services globally. Tariffs imposed by major trading partners can render imported inputs more expensive, thereby increasing production costs. Likewise, anti-dumping measures targeted at foreign suppliers can limit access to essential resources needed for manufacturing processes.
Conclusion
As evidenced by the S&P Global Commodity Insights steel sentiment survey results, the Mexican steel market confronts mounting difficulties, characterized by negative pricing sentiment, reduced production expectations, and diminishing raw material expenses. Steel pricing in Mexico can have an effect on the volume and pricing of import and export of steel to the United States. Stakeholders must monitor closely interrelated variables influencing the steel landscape and adapt proactively to emerging challenges.
