Analysis
May 3, 2026
Final Thoughts: what does it mean when steel buyers' sentiment inverts?
Written by Michael Cowden
I haven’t done a deep dive into our sentiment data for a little while. And it’s timely to do so now. Why? Because we’re seeing what I’ll call the inverted yield curve of steel buyers’ sentiment.
As we all know, an inverted yield curve occurs when short-term debt offers higher yields than long-term debt. It’s often seen as an indicator of a potential economic slowdown.
To be clear, I’m not saying SMU data has any such predictive powers. But we are seeing some unusual trends in sentiment. And they’re worth paying attention to.
Namely, people are very bullish about the short-term. SMU’s Current Steel Buyers’ Sentiment Index stands at is highest point since May 2023 – three years ago. (You can follow along with our archives on buyer sentiment here.) But they are also a little leery about the long-term. Our Future Steel Buyers’ Sentiment Index, while higher than it was last year, fell in our last survey and remains well below the average of the past three years.
Typically, it’s the opposite. People are bullish about the long-term but more cautious about their immediate prospects.
We’ve seen current sentiment stronger than future sentiment for two consecutive surveys now. We do our full steel market surveys every two weeks, so for the last month. I don’t read too much into any single survey. And I wouldn’t call two data points a trend. But it’s worth keeping an eye on.
Why? Take a look at the last few times when current sentiment has exceeded future sentiment for a significant period of time. Namely, March-May 2023, January-February 2024, and February-March 2025.
Why do those times stand out?
March-May 2023 is when prices inflected lower after the Silicon Valley Bank collapse sent a scare across the broader economy. Hot-rolled (HR) coil prices reached $1,160 per short ton (st) in mid-April 2023, which turned out to be a peak for that year. (You can follow along with our price archives here.) By the end of May 2023, they had declined nearly 15% to $990/st and were on their way to a 2023 low of $645/st in September.
January-February 2024 is when a sharp rally in Q4’23 – propelled by the resolution of a UAW strike – fizzled out. HR coil prices hit a 2024 peak of $1,045/st in mid-January 2024 and had declined approximately 21% to $830/st by the end of February 2024 before hitting a bottom of $635/st that July.
February-March 2025 is when President Trump announced – and then enacted – stricter Section 232 tariffs. People knew future prices would be higher than current prices. And a buying frenzy erupted as they bought as much as they could to get ahead of future prices hikes. The result: buyers pulled forward Q2 demand into Q1. (It didn’t help that uncertainty around Liberation Day tariffs – rolled out on April 2, 2025 – sent the market lower.)
What did HR prices do? They hit a 2025 peak of $950/st in March. By the end of April, they had dropped 7% to $885/st and continued to drift lower until bottoming out in late September at $785/st.
Two data points do not make a trend. But I think you can also see why I’m paying close attention to it.
That said, there are some huge exceptions to the rule.
Case in point: Steel buyers were more optimistic about the present than the future for much of late 2020 and early 2021. HR prices, meanwhile, were on a relentless, roughly year-long rally from around $440/st in August 2020 to $1,955/st in September 2021.
The difference then? People didn’t believe in a rally right under their noses. Even as lead times extended and inventories dwindled amid unplanned outages and better-than-expected demand. Sound familiar? Many market participants simply couldn’t fathom the market could be so good just a few months after we’d feared the world as we knew it might end. (Btw, I don’t mean to understate how awful the pandemic was.)
And so, in 2H 2020 and throughout much of 2021, we climbed a wall of worry higher. Surely prices were just about to inflect lower. I’m sure you can recall some of the theories, even if they seem preposterous in retrospect. HR prices couldn’t rise past $1,000/st or we’d see a repeat of 2008. They couldn’t rise for more than six months. Because we were in an era of mini-cycles. Anything close to $2,000/st was crazy talk because no one had ever seen HR prices so high before. And yet prices kept rising until mills finally caught up with demand (and then overshot it) in Q4’21.
In other words, the inverted yield curve of steel doesn’t always mean the same thing. It could mean we’re at an inflection point. Maybe this time the Iran war and a steep increase in fuel prices and inflation will send the market lower in 2H. If you think that, you might say $1,100/st HR is risky territory.
It could also mean that the market again doesn’t believe in a rally that’s hiding in plain sight. If you think that’s the case, you might say the AI boom, demand for data centers, and for more power generation (and an upgraded grid) outweigh the impact of the Iran war. You might say the data boom will continue to drive prices higher for longer – well into 2H. And you might also think there is no reason for HR to stop at $1,200/st.
Whatever the case, it’s safe to say that it’s unusual for Current Sentiment to be higher than Future Sentiment. And if you’re one of the people who’ve told me this is a “weird” market, it’s not just you – the data suggest it is too.
Join SMU and SDI for a Steel 101 in Texas
Didn’t get a chance to plan a spring break? Don’t worry! SMU has you covered.
Join us for our next Steel 101 on May 19-20 in Corpus Christi, Texas. Attendees will learn how steel is made and used. That knowledge will stick after they see SDI’s mill in Sinton putting the heat in “hot rolled,” and also tour Bull Moose Tube.
You can find out more and register here.
And if you decide to stay an extra day or three for a Gulf Coast vacation, well, we’d say that’s time well spent too.
