Features

SMU Steel Demand Index still lags

Written by David Schollaert

July 30, 2025

SMU’s Steel Demand Index has remained in contraction, according to late July indicators. Though growth faded at a slightly slower pace, the slowdown remains largely in response to ongoing tariff uncertainty.

Following moderate declines since the back half of March, the index has undergone a slight recovery since dropping to its lowest reading in over a year in late June. The index fell out of expansion territory and has struggled to find its footing since mid-April.

The Steel Demand Index, compiled from our survey data, now stands at 42, up from 38.5 in early July, but off from a four-year high of 65.0 in late February.

Methodology

Derived from the market surveys SMU conducts every two weeks, the index compares lead times and demand to create a diffusion index. This index has historically preceded lead times. This is notable given that lead times are often seen as a leading indicator of steel price moves. An index score above 50 indicates rising demand, and a score below 50 suggests declining demand.

Figure 1 shows the nearly 13-year history of the index on the left and provides a closer look at the Steel Demand Index readings of the past two years on the right.

Rearview mirror analysis

Last year, demand slipped. Not all at once—just a slow, steady drop. Spot buying faltered and prices faded. The index sank into contraction and stayed there most of 2024.

Momentum accelerated at the start of the year, driving growth. But despite brief price spikes — driven by sudden price increases from mills — market conditions have stayed soft due to sluggish end-use demand.

A tale of shifting tariffs

Early optimism with the arrival of the new administration has faded after a reworked Section 232 tariff stirred the market. But a never-ending carousel of tariff uncertainty has curbed buying and lessened spot demand.

HR coil prices have seen a similar trend, reaching $950 per short ton (st) in early March, but have since ticked down repeatedly—now averaging $840/st, according to SMU’s latest check of the market on Tuesday, July 29.

Lead times remain below five weeks on average, now at 4.4 weeks in our latest assessment on July 23, down from 5.1 weeks on average just in early May.

For nearly a decade, SMU’s steel demand diffusion index has preceded 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 (Figure 3).

Signals ahead

Demand is steady, but buying remains largely tied to contracts — in many cases, buyers are taking max volumes. But they appear to be unwilling to carry excess inventory, especially since Q1’s tariff-driven buying surge has passed.

We’ve seen a jump in mills willing to talk price, with sources telling SMU that mills are hungrier than they were 30-45 days ago. This is an indication order books are softer as we carry through the dead summer.

Prices are moving lower after a short-lived $50/st-bump in June when Section 232 tariffs were doubled. And while tariffs have helped set a floor for prices, downward pressure remains. The question now is when will they bottom?

Editor’s note

David Schollaert

David Schollaert is deputy editor-in-chief for Steel Market Update. David joined SMU after more than a decade in the metals and mining industry in a myriad of different roles. Much of his early experience and expertise were within the coverage and analysis of steel-making raw materials and served previously as senior editor of the CRU Prices Service. Most recently, however, before his return to market analysis, David held roles as a metals buyer and an operations manager for raw material suppliers. He can be contacted at david@steelmarketupdate.com or 724-720-1008.

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