Final Thoughts

This evening we published our SMU Mill Lead Times by Product analysis. I recently received a few questions on the subject: How do we gather our lead time data? Do we take into consideration the lead times being published by the individual domestic steel mills? How do we feel the information we report is indicative of what is happening in the market?

• The lead time data is collected during our flat rolled and plate steel market trends survey. This survey is conducted every other week. We only collect mill lead time data from manufacturing companies and steel service centers/wholesalers. We do not collect lead time data from steel mills, trading companies or toll processors. We compile the data collected and come up with an average based on the total number of responses.
• We do not collect data from the steel mills, as our goal is to produce a representative sample of what steel buyers are seeing from their suppliers, which may differ from what the mills may be reporting for general consumption.
• What we are trying to capture are changes to the markets represented by changes in the average mill lead time by product. When mill order books are full, lead times extend and the ability of steel buyers to negotiate lower prices with their mill suppliers is reduced. As lead times shrink, the opposite occurs. Mill order books weaken, creating opportunities for steel buyers to negotiate lower steel prices. Lead times are also an indicator of market strength, and changes in lead times would be one of the indicators signaling a change in the direction of market demand, which in turn affects price negotiations.