Service centers: Mill orders down marginally in May

The MOI now stands at 84.1, down just 0.2% from 84.3 in April. The result is, however, far removed from a six-month high of 114.5 in February. And it’s still the lowest reading since October.

Methodology

SMU’s MOI, which evaluates the latest change in service center mill order entries, is a relative index derived from our monthly service center inventories data. This index is a good indicator of current service center buying patterns, displaying perceived demand and lead times. This is notable given that lead times are typically a leading indicator of steel price moves.

The MOI uses a base period, presently 2022-24, to establish a reference point for measuring service centers’ mill orders over time. This base period is assigned an index value of 100. Subsequent MOI values are then calculated relative to this base.

An index score above 100 indicates an increase in buying, and a score below 100 indicates a decrease.

Figure 1 shows the nearly six-year history of the index on the left and provides a closer look at the MOI readings of the past two years on the right (100 = 2022-24 average).

Background

In the second half of 2024, large buyers capitalized on discounted prices with strategic, bottom-dollar purchases. But as demand weakened, the focus shifted sharply to inventory control.

Despite brief price spikes—driven by sudden price increases from mills— market conditions stayed soft due to sluggish end-use demand (as shown in the right-side chart in Figure 1 above).

In response, a rise in intake volume was reported for most of Q1. A boost in buying from downstream customers, pulled forward demand ahead of tariff-fueled price increases. The increase in service center orders was met with a rapid rise in mill prices.

The skinny

Weak demand across most sectors was evident, especially once the tariff-driven buying surge fizzled out. With downstream buyers largely stocked, both intake and new order entries should remain subdued. SMU’s MOI could still edge lower, but most likely will see little variation in the near-term with service centers keeping inventories in check.

SMU’s MOI pairs well with—and has for the past five years proceeded—moves in mill lead times (Figure 2). And SMU’s lead times have also been a leading indicator of flat-rolled steel prices, particularly for HRC (see left-side chart in Figure 3).

Our MOI also pairs well with our Steel Demand Index (see right-side chart in Figure 3), which, for nearly a decade, has preceded moves in mill lead times.

Prices have turned and are now moving up again. However, this is in response to the Trump administration doubling Section 232 tariffs on imported steel to 50% on June 3.

The move stopped the recent price erosion, turning prices up $35 per short ton (st) in roughly two weeks. US hot band prices are currently $880/st, up $20/st week over week (w/w), according to our June 17 check of the market.

And lead times were out slightly again in our latest assessment on June 10. They are presently 4.6 weeks on average, up from 4.2 weeks in late May.

We clearly saw an inflection point in our most recent survey data with the announcement of doubled tariffs. And while uncertainty prevails, some early panic buying has been seen because of higher tariffs on steel.

Keep in mind, this is May service center data. While demand indications might still be pointing lower, there’s been an immediate shift. Not only are prices and lead times up, but mills stopped cutting deals. But it’s all against the backdrop of a much softer market than what we saw during a previous Section 232 buying frenzy in Q1.

With moderate demand expectations and ongoing pricing uncertainty in the domestic and import markets, service centers appear focused on cutting or maintaining inventory levels. This is especially true as the market moves closer to a historically slower summer period.

Service center shipments will need to improve, but if downstream inventories remain well stocked, a significant shift in demand will be necessary to maintain this current recovery.

Editor’s Note

Order entries, demand, lead times, and prices are based on the average data from manufacturers and steel service centers who participate in SMU’s monthly inventories and every other week market trends analysis surveys. Our demand and lead times do not predict prices but are leading indicators of overall market dynamics and potential pricing dynamics. Look to your mill rep for actual lead times and prices.