SMU Steel Demand Index grows at a slower pace

The index has been in expansion and gaining momentum since late November. The trend continues to underscore steady-to-rising demand as supply remains tight.

The positive movement began to take shape with an early buying frenzy ignited by the onset of undiluted Section 232 steel tariffs last March. And after a slight decline post-rush, the erosion of imports resulted in steady, widespread positive momentum in demand.

But are slightly lower readings a case of summer doldrums or a larger indication of easing demand?

Methodology

Derived from the market surveys SMU conducts every other week, the Steel Demand Index is a diffusion index and a statistical tool to measure the breadth of change across our overall demand data series. It effectively helps identify widespread demand trends or turning points.

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.

What got us here

Last year, demand was uneven but improved from 2024, with tariff changes helping establish a higher price floor.

Since then, sentiment, demand and prices have all strengthened. The current sheet price rally has now lasted more than 10 months — the longest since the post-pandemic rebound — supported by mill discipline and continued barriers to imports.

The upward grind appears as if it will continue. While there has been some talk and support of summer doldrums, outages and tight supplies would indicate prices will continue to climb.

Lead times for hot-rolled coil are now close to eight weeks on average, and sniffing October. Depending on the mill, that could even spill further into Q4. The dynamic could point to it carrying through the balance of the year.

What’s currently in play

HR coil prices have followed a similar trend, reaching an average of $1,165 per short ton (st) this week. They are up and pointing higher, even if at a slightly slower pace. According to SMU’s latest market check on Tuesday, July 22, domestic hot band ranged from $1,130/st to $1,200/st.

Lead times have moved up as well. Production times have risen since last November and remain at multi-year highs. Current levels are nearly double those seen last summer.

Some mills are beginning to catch up on orders following their spring outages, but others are reportedly still struggling to keep up with demand and are quoting significantly longer production times. And now fall outages are likely to impact supply availability again.

The average production time for HR coil is 7.8 weeks, the longest recorded since October 2021.

For nearly a decade, SMU’s steel demand diffusion index has preceded moves in mill lead times (Figure 2, left side), and SMU’s lead times have also been a leading indicator of flat-rolled steel prices, particularly for HRC (Figure 2, right side).

In their own words

Here are just a few quotes from our latest survey about how flat-rolled steel buyers see demand, and what might be triggering their perspective:

“After five months of very strong sales, I’m seeing a slowing of sales this month.”

“Customers looking for alternative supply options.”

“It is either improving or the heavy weight of low inventory makes it feel that way.”

“Still lots of large inquiries/jobs.”

“Expected summer doldrums.”

“Demand is strong.”

“Same as indicated above—steady—not outstanding.”

“Most manufacturing sectors are improving.”

“Oil price increases.”

“Stable at a high level.”

Signals ahead

Demand is steady, but buying remains largely tied to contracts—in many cases, held to minimum volumes and actively looking to add through spot.

While there has been a slight easing in apparent demand and a slower rise in prices, most attribute it to the typical summer doldrums and not a shift in market dynamics.

If anything, most continue to complain that the removal of import volumes because of an aggressive tariff regime is largely to blame for present market dynamics.  

And while inventories were initially closely monitored to start the year, there has been a shift. But stretching lead times and intake delays have drastically tightened supply and led to a broader search for spot tons.

This has been the trend for much of the past six-plus months.

But lead times and prices are moving up. In fact, HR coil prices are in the middle of one of their most sustained rallies since the post-pandemic surge. And while it’s not exclusively demand-driven, tariffs have slashed import competition, providing a stronger base for domestic products and thus prices.

But with domestic prices rising and offshore markets trending in the opposite direction, the arrival of imports could impact the market.

Time will tell, but we should have a clear picture post-summer and hopefully just in time for the SMU Steel Summit in late August.

In the interim, we’ll continue to report on indicators, looking for smoother sailing ahead.

Editor’s note

Demand, lead times, and prices are based on the average data from manufacturers and steel service centers participating in SMU’s 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.