A recent U.S. price rally slowed alongside buying activity after “Liberation Day” tariffs were announced. As these various tariffs evolved from a talking point to action, HR Coil futures have now eased back and are now pricing in a 2025 H2 price of $803/s.ton.

“Liberation Day” has come and gone in the U.S., and it is now known that reciprocal tariffs will not stack on top of existing steel tariffs. This has helped slow U.S. buying activity more recently following a surge in prices last month, although domestic mills remain busy. Mexican mills increased prices to better align with those in the U.S., but demand remains under threat as export-oriented sectors slow due to tariffs. Demand has also weakened in Brazil, sending prices lower m/m.

The recent price surge seen across all sheet products in the U.S. market has slowed.  HR coil prices were nearly flat m/m at down $5/s.ton to $944/s.ton, while CR coil and HDG coil (base) prices achieved higher levels after rising by $31/s.ton and $49/s.ton to $1,182/s.ton and $1,160/s.ton, respectively. There was a drop in volumes collected for HR coil this week as buying activity paused, although the range of prices submitted was the widest recorded since late January, when the current pricing rally began.

While there has been a slowdown in the recent tariff-driven buying activity, U.S. mills have remained busy enough to keep prices supported relative to prior-month levels. In part, this is due to a change by domestic automotive producers in sourcing practices because of new tariffs. Instead of making purchases from Mexican or Canadian producers, automakers are now buying more volume from domestic mills. This quick switch in procurement patterns means that even during a period where total automotive demand may be off, domestic mills are still busy with orders from the sector.  In addition, demand that has been pulled forward since the reset of Section 232 (S232) tariffs has kept mill order books strong for now. Lead times for HR coil have remained between five and a half to six weeks over the past month.

At the same time, fewer buyers have expressed interest in taking a risk on imports.  Not only could tariffs be changed overnight by the current administration (as happened in 2019), but price volatility over the past few years has shown that current offers can quickly become uncompetitive. Moreover, preliminary antidumping margins were set on imports from 10 countries for corrosion resistant products. Some of these were set as high as 50% for a Canadian supplier, 138% for a Brazilian producer and 88% for imports from Vietnam. 

There is still much uncertainty surrounding what demand will look like moving forward, especially as tariffs come into effect and alter business activity. Data in manufacturing activity as measured by the Institute for Supply Management (ISM), for example, show that new tariffs may already be having an adverse effect on demand. For March, ISM’s Purchasing Manufacturers Index slid back into contraction territory after gaining ground in January and February (see chart). While this move into contraction may reverse in the coming months, it is a signal to buyers to be careful about overbuying in the near term.

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As various tariffs evolved from a talking point to action, HR Coil futures have now eased back and are now pricing in a 2025 H2 price of $803/s.ton.

At market close this past Monday, April 7, the forward curve of HR Coil futures listed by CME Group has shifted into backwardation where prices in the very near term are higher than prices in the following months. Futures prices in 2025 H2 have fallen from an average of $862/s.ton on March 10 to an average of $803/s.ton earlier this week.

Futures prices had rapidly increased alongside the full reset of the S232 steel tariffs. These tariffs eliminated all country-specific exclusions, which meant that supply from Canada and Mexico, the top two trading partners of the U.S., now had a 25% tariff attached. Prior to this tariff reset, physical prices of HR coil averaged $685/s.ton in December through January versus prices today of $944/s.ton. At current market prices, imports from Canada and Mexico can continue to be competitive, especially as the reciprocal tariffs are not additive to S232 tariffs.

While imports from Canada and Mexico are competitive today, they may struggle to compete if physical HR coils prices fall back towards $800 later this year. Perhaps due to this, the current forward curve is too bearish. However, the previously mentioned reciprocal tariffs alongside rampant market uncertainty will likely slow demand across a variety of end uses. If the U.S. market is on the verge of tariff-related demand destruction, the current forward price may not be bearish enough. Regardless of how prices evolve, we expect to see yet another great use case emerge for the adoption of steel futures to properly manage steel price risk.

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