Final Thoughts

Final Thoughts

Written by Michael Cowden

I want to give a shoutout to the North American Steel Alliance (NASA) for giving me the opportunity to provide a keynote address at their Forecast Conference in Chicago earlier this week.

And I want to take a minute to dive deeper into SMU’s lead time figures, one of the indicators I highlighted at the event as key to watch heading into 2023.

I suggested that Forecast Conference attendees keep a close eye out for hot-rolled coil lead times slipping below four weeks and for cold-rolled and coated lead times dropping below six weeks.

SMU was narrowly above those levels when we released our last survey results in mid-October. We are at or modestly below those thresholds in our latest survey.

The question is, as it often is this time of year, is this typical seasonality or an indication of weak demand?


Lead Times

For starters, let’s not freak out. It’s not like hot-rolled lead times haven’t dipped below four weeks before. We were modestly below four weeks in mid/late July. I’d chalk that one up to the typical summer doldrums.

Hot rolled lead times at around four weeks now puts us as Thanksgiving. (OK, technically we’re at 3.97 weeks. You can see that for yourself with our interactive pricing tool, which is here.)

Cold rolled and coated lead times at 5-6 weeks puts us into December – the period when we typically see manufacturing activity slow for the holidays. And buyers in places like Harris County, Texas, aren’t keen to have steel on hand because of year-end inventory taxes.

In short, the current lead time figures don’t mean the sky is falling. I’d expect lead times to remain low, perhaps to move lower still, for the next few weeks. If normal seasonal patterns hold, we should see lead times and demand start to improve as we get closer to 2023.

Look at last year if you want an example of what the sky falling looks like. HRC lead times were approximately eight weeks in late October. Service centers had 56.7 shipping delays of supply. Those two factors alone go a long way toward explaining why it was hard to negotiate lower spot prices or better contract terms at the time.

But as we all know, supply finally caught up with post-pandemic demand at the end of 2021, and then some. The result: HRC lead times fell steadily from eight weeks around Halloween last year to less than four weeks for much of January and February. They might have remained there had the war in Ukraine not sent them sharply higher in March and April.

In short, HRC lead times remaining below four weeks in January would be a tell-tale sign that 2023 could be a bad year for steel, with supply swamping demand. Again, I’m not predicting that will be the case. But it’s time to start watching for whether lead times will inflect higher, a sign of normal seasonality, or lower, a sign of tough times ahead.


Another tell-tale sign of a bad market for steel, and something we also saw last year, would be scrap prices falling in January and February. Prime scrap should in theory move higher because less manufacturing activity at year-end means less prime is being generated. And cold weather in the North typically slows collection of obsolete grades.

But last year, scrap prices fell across the board in January and February, with prime scrap, in particular, posting massive declines. Will we see scrap prices bottom out and trend upward as we get closer to 2023? Or will scrap start the year lower, something that would be a bad omen indeed. Simply put, scrap is another key indicator to watch.


In the meantime, I think it’s safe to put to bed the notion that we’ll somehow come out of the gate in 2023 with prices flying higher. We’re not going to see what we saw in Q1 2021 anytime soon.

Consider overall demand, which you can find on our website here.

Our benchmark HRC price stands at $710 per ton. We were modestly lower, $685 per ton, in late October 2020. The difference between now and then? Approximately 94% of respondents to our surveys were reporting stable (50%) or increasing (44%) demand in October 2020. Only 6% said demand was falling. You didn’t have to be a rocket scientist to see that prices had nowhere to go but up.

This year, the picture is murkier. Most respondents (62%) report that demand is stable. But a sizeable minority (26%) say demand is falling, and only a few (12%) say that it is increasing. It’s hard to see prices moving up unless those figures improve.

The keen observers among you might note that those overall demand figures come from our last full survey in mid-October. We’ll post our latest overall demand figures when we release full survey results on Friday afternoon. You will be able to find those full results here.

SMU New Joiner

Lindsey Fox has joined SMU as an account executive. Lindsey will be responsible for SMU sales, marketing, and customer service. She will be your contact point whether you’re updating your membership or joining SMU for the first time.

You can reach Lindsey (with an ‘e’) at Our emails aren’t hard to figure out.

And thanks, from all of us at SMU, for your business. We truly appreciate it.

By Michael Cowden,

Michael Cowden

Read more from Michael Cowden

Latest in Final Thoughts