While manufacturers generally reported favorable business conditions all over the United States, companies in all the Federal Reserve Districts pointed to Trump administration tariffs as cause for concern, according to the Fed’s July 18 Beige Book report.
Economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth. The outliers were the Dallas District, which reported strong growth driven in part by the energy sector, and the St. Louis District where growth was described as slight. Manufacturers in all the Fed Districts expressed concern about tariffs and in many reported higher prices and supply disruptions that they attributed to the new trade policies. All Districts reported that labor markets were tight and many said their inability to find workers constrained growth. Contacts reported higher input prices and shrinking margins. Six Districts specifically mentioned trucking capacity as an issue and attributed it to a shortage of commercial drivers.
Lead times, especially on hot rolled steel, have continued to gradually shorten over the past couple of months, according to Steel Market Update’s latest market trends data. Lead times for hot rolled now average just above five weeks, for cold rolled a bit less than seven and a half weeks, for galvanized a bit more than seven and a half weeks, and for Galvalume a bit less than eight weeks. Lead times for all these products are significantly extended compared to this time last year.
Negotiations between steel mills and buyers may have turned a corner as the mills appear significantly more willing to negotiate spot prices than at any other point this year.
Data from Steel Market Update’s latest market trends questionnaire shows current industry sentiment stablizing after a bit of a swoon seen earlier this year due to the uncertainty related to the Section 232 tariffs and surprises regarding exclusions (or lack thereof). From a historical perspective, current sentiment remains at highly optimistic levels, however.
SMU’s Steel Buyers Sentiment Index registered +66 out of a possible +100 this week, up 2 points from early July. Calculated as a three-month moving average (3MMA) to smooth out the data, the index dipped slightly to +66.33, but remained above the low reading of the year of 66.50 recorded in mid-May. The Current Sentiment Index continues to be optimistic, albeit at lower levels than earlier this year, but it has returned to the levels reported one year ago.
Current Steel Buyers Sentiment Index measures how buyers and sellers of flat rolled and plate steel feel about their company's abiity to be successful in the "current" market environment.
Imports of foreign steel continue at a brisk pace, despite the Section 232 tariffs placed on steel imports from every country in the world except Australia (no quota), South Korea (with quota), Brazil (with quota) and Argentina (with quota). Since the Section 232 tariffs began at the beginning of May, and most foreign mill lead times are 3-5 months for delivery, we should start to see reductions in imported tons during the months of July, August and beyond.