SMU's Mill Order Index rose again in July

July intake was up 6.5% month on month (m/m), outpacing outbound shipments for the month by more than 4%, which were largely even (-0.1%) m/m in July.

Year-to-date (YTD) service center inventory in July was down 16% y/y, while outbound shipments were up 8%. Those trends underscore the continued inventory struggle.

Service centers’ daily shipping rates—down 0.1% from June—were still up 8% vs. year-ago levels. The daily shipping rate was largely flat m/m as shipping days were identical. July had 22 shipping days on average, unchanged from 22 in June.

Key highlights

Recent efforts to maintain leaner inventories turned as steel availability was squeezed. This is reflected in a consistent jump in the percentage of inventory on order, which, though flat m/m, is up by nearly 90% y/y. It remains the highest total since July 2021 and exceeds current inventory levels by more than 12%.

While service centers try to balance inventory with demand, it has become more challenging. Mill contracts are generally held to minimums or have been placed on allocation. And spot tons are not readily available.

Some double-buying has been reported, but in limited volumes. And service centers relying heavily on contract tons are seeing supply lag outbound shipments. When comparing year-ago levels, inventories are down 16%, while shipments are up 8%.

The MOI now stands at 121.3, up 0.3% from 120.9 in June. The MOI was nearly 9% above the average year-to-date reading of 111.7, and up nearly 20% y/y. Results suggest inventories remain uncomfortably lean as service centers try to rebalance stock as available units are squeezed.

Methodology

SMU derives its MOI—a relative index that evaluates the latest change in service center mill order entries—from our monthly service center inventory data. This index is a good indicator of current service center buying patterns, displaying perceived demand and lead times. This stands out because lead times typically signal upcoming moves in steel prices.

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 = 2022-2024 average).

Background

Market conditions in 2025 saw brief price spikes, but overall activity remained mostly steady and at times sluggish. It was held back by weak end‑use demand (as shown in the right‑side chart of Figure 1).

Intake volumes rose through much of Q1 last year as downstream buyers pulled purchases forward in anticipation of tariff‑driven price increases. That surge in service center orders pushed mill prices up quickly, even though underlying demand didn’t improve.

After peaking a year earlier, intake volumes began a gradual decline. Service centers ultimately caught the market low point in October and held their positions through the end of 2025.

What got us here

First-quarter intake volumes improved seasonally but remained below year-ago levels as tariffs constrained imports. Downstream inventories stayed tight and focused on contract fulfilment. It resulted in only a marginal increase in service-center shipments. Distributors showed similar trends.

New orders reached a two-year high in October, then fell by more than 30% in November and have since stabilized.

July’s intake was 19% above the monthly average intake since last November.

The improvement and subsequent stabilization in the first three months of 2026 are consistent with seasonal patterns. However, unplanned outages and production delays tightened supply, pushing prices higher as buyers replenished inventories and met demand.

SMU’s MOI will likely remain at elevated levels in the immediate term and potentially into Q4. And inventories, while tight, could be impacted even more as new order entries rise, and lead times remain longer than normal. Production delays and planned outages in late Q3 have helped keep lead times extended. This has further impacted the supply pipeline.

SMU’s MOI pairs well with—and for the past five years 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 (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. The latest data show some alignment after recent disagreement. This could be an indication of a slight easing in demand after peaking in mid-June and a slight onset of summer doldrums.

How will things settle?

July inventories, while up 2% m/m, are down 16% y/y, as already noted. Shipments show a slightly diverging trend, down 0.1% but up 8%, respectively, in the same time frame. HRC prices have risen $410 per short ton since late September and are arguably on their strongest rally to date, excluding a black-swan event.

And lead times have been steadily stretching out, holding above seven weeks on average since April.

The downstream supply chain remains lean, with service centers and distributors reportedly facing their tightest conditions in years. July inventories remain mainly constrained, hardly sufficient to meet demand as lead times remain long, supporting higher prices.

Longer lead times and limited spot availability could push prices higher still, although imports may ease some tightness. But that will only be seen in late Q4 and into Q1 2027. This helps explain why the Mill Order Index remains firm while the Demand Index has been somewhat inconsistent.