U.S. prices have fallen m/m because of weak demand and plentiful supply from mills. Still, momentum has changed over the past week on tariff increases.

After declining for much of the past month, momentum in the U.S. sheet market has turned after a surprise announcement from President Donald Trump that Section 232 (S232) tariffs were going to be increased from 25% to 50%. Buying activity has picked up substantially over the last week as a result, and lead times are beginning to lengthen. However, price increases so far have not been uniform. By extension, prices in Mexico also declined, and producers there are feeling the impact from increased tariff levels limiting their ability to export to the USA. In Brazil, both excessive supply and pressure from imports have led to lower prices m/m.

While market momentum has shifted over the past week, U.S. prices were still down m/m across all products in June. HR coil prices declined m/m by $59 /s.ton to $847 /s.ton, CR coil by $68 /s.ton to $1,057 /s.ton and HDG coil (base) prices by $39 /s.ton to $1,100 /s.ton.

For much of the past month, demand has slumped as prices continued to fall, and import offers remained competitive. This drop in demand is visible both in a 9% m/m decline in automotive sales in May and negative readings from the Institute for Supply Management’s PMI. As such, buyers have either remained out of the market—taking only their contract minimums—or have accepted spot deals at increasingly lower prices. Moreover, supply availability has increased noticeably in part due to the expansion at Big River Steel, which is now producing prime grade material and selling it into the market.

However, market momentum reversed following the S232 increase announcement which came into effect on June 4. Buyers largely waited until mid-week last week for tariffs to be finalized before returning to the market, jumpstarting demand that had grown increasingly weaker throughout the past month. This resulted in a large range of pricing seen in our latest weekly collected transaction data. For last week, transactions taking place earlier in the week were done at notably lower levels than those done later. 

We noted last month that the Canadian and U.S. markets have diverged in terms of pricing. Canadian mill offers to Canadian buyers have remained in the low equivalent of $600 /s.ton FOB mill for much of the last month. Even so, import penetration by Canadian sellers into the U.S. market has slowed. In fact, imports of coiled products from Canada dropped to their lowest levels during April and May since June 2020 (see chart).

Importers with material on the water at the time of the tariff increase announcement have had a couple of options. One is to ship material into a bonded warehouse and wait for tariffs to either be eased back or to renegotiate pricing. Another has been prior agreements that, if tariffs were increased, the buyer and seller will split the cost (or even share it with a third-party broker where applicable).

In our view, the tariff change has resulted in yet another repricing of the U.S. domestic market. Whereas a price floor set by imports might have been ~$750 /s.ton prior to the tariff rise, this floor has now risen to somewhere between $875-930 /s.ton. However, there will still likely be offers below this level, especially as Asian markets continue to weaken.

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The HR Coil futures market jumped as it priced in the doubled S232 steel tariff, though the wider market does not expect this 50% tariff to remain in perpetuity.

On May 30, President Trump made a surprise announcement to double the S232 steel tariffs from 25% to 50% with the change going into effect on June 4. This announcement instantly drove the forward curve sharply higher.

As of this past Monday, the HR coil forward curve listed by CME Group is now pricing in $882 /s.ton for 2025 H2, up from $813 in early May. This new price level is within range of our new price floor estimate based on a mix of Asian and Canadian HR coil imports that would set the domestic U.S. market inclusive of tariff and logistics costs. Based on this higher floor, we expect that domestic HR coil prices will rise further, so long as this higher tariff remains in place and end demand doesn’t dramatically slow.

Due to the likelihood of higher HR coil prices if the 50% tariff remains, the current forward curve may provide value to steel consumers to minimize some of their exposure to higher prices. However, the wider market largely expects the 50% tariff to fall back to 25% at some point, perhaps as part of the trade deals being negotiated between the U.S. and various other countries. If a lower S232 tariff rate is granted, either to specific countries or overall, natural sellers may find value in the current forward curve to hedge their own price risk exposure.

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