Final Thoughts

For starters, the weeks after President Trump’s inauguration fueled a wave of optimism about stronger support for US manufacturing, not only in the form of tariffs but also in the form of lower taxes and fewer regulations. Case in point: SMU’s Current Buyers’ Sentiment Index peaked at +66 in mid-February 2025. (It now stands at +38.)

Speaking of last February, that month felt, at least to those of us in the steel new business, like a full year. Why? When it came to tariffs alone, so much news came at the last minute. And so much of it came after hours, on Friday evenings, or over the weekend. One example: Trump announced on Super Bowl Sunday that he would impose 25% Section 232 tariffs on all imported steel and aluminum. (The timing of that announcement, on Air Force One on his way to the game, also meant I didn’t get to watch the Super Bowl. But I digress.)

What do you do if you know the price tomorrow will be higher than the price today? You buy. And we subsequently saw a wave of buying that extended lead times and sent prices soaring higher. There was even talk of hot band hitting a grand.

But then Liberation Day hit in early April and brought with it a wave of uncertainty that halted Q1’s pricing momentum. Also, 25% might have been new for Canada, Mexico, Europe, and Japan. But it was status quo for other countries – and so they continued to ship to the US.

Trump responded in June by doubling S232 tariffs to 50%. And we didn’t just see higher tariffs over the summer, we also saw a significant win for domestic mills in a sprawling AD/CVD case against imports of coated flat-rolled steel.

The 50% was more of a slow burn. Domestic prices continued to fall over the summer. But imports eventually dried up at the same time that inventories continued to be whittled down. The result: We saw a wave of buying in October, when savvy market participants correctly predicted a market bottom.

Lead times stretched out and spot prices continued to rise throughout Q4. But, as best as we can tell, buying slowed down in November and December. So, the big question now is, at least when it comes to prices, what comes next?

M&A and new capacity too!

It was a massive year for mergers, too. Japan’s Nippon Steel finalized its nearly $15 billion acquisition of U.S. Steel in July. The deal came after years of political wrangling and intense opposition from Cleveland-Cliffs and United Steelworkers (USW) union leadership.

Meanwhile, something has been going on between South Korean steelmaker POSCO and Cleveland-Cliffs. It’s not yet clear whether that means POSCO taking a minority stake in Cliffs, which the Korean press has reported, or the “transformative” deal Cliffs has hinted at. (Or, just thinking out loud here, does POSCO slowly up its stake in Cliffs until it becomes something transformative?)

Also, we’ve seen waves of mergers announced in the service center space. Who would have thought this time last year that we’d see Ryerson merging with Olympic or Worthington Steel with its eyes on Klöckner? (A side note to all this M&A news: I’ll be sad to see two of my favorite tickers in steel go – X and ZEUS.)

At the same time, we continued to see new capacity enter the market and ramp up. BR2, for example. Hybar too! And we’ll continue to see that in the years ahead. Not only with Nucor’s new sheet mill in West Virginia but also, later this decade, with Hyundai and POSCO cooperating on a new sheet mill in Louisiana.

It will be interesting to see how it all shakes out, especially when it’s not so obvious how certain old capacity might exit the market. I say that because we saw this year how Trump’s ‘Golden Share’ in U.S. Steel kept Granite City running. It’s now restarting a blast furnace, even though that clearly wasn’t part of the initial plan.

What comes next in 2026?

That probably depends on how you answer some other big questions. Take imports. Total steel imports have fallen to their lowest levels since December 2020, and total finished steel imports dropped to their lowest levels since December 2009. Those years were bad years for steel and for the world.

The consensus appears to be that the drop in imports is because of higher tariffs and because, thanks to new domestic capacity, the US does not need imports nearly as much as it did in the past. Those are both fair points. That said, lower import volumes in 2009 and 2020 also reflected an overall drop in economic activity. Is that something that we’re seeing now? I ask because, while the steel-specific data we collect remains mostly positive, some of the macro-economic data, not so much. (Persistent inflation, a cooling labor market, low consumer confidence, etc.)

There are the bright spots that we’ve all heard about – chief among them data centers, AI, and the energy infrastructure needed to support them. And as Wells Fargo Securities Managing Director Timna Tanners noted on a Community Chat last week, people might not like the idea of a “demandless recovery” supporting prices. But if supplies remain limited, it doesn’t really matter whether you like that expression – prices will remain elevated.

Or will they? We’ve noted in a couple of recent articles – one by SMU and one by CRU – that imports might become competitive again if US mills continue to raise prices. Maybe. Or will fears of an out-of-the-blue tariff increase make buyers leery of imports? And who could blame them? We learned this week that Canada and the US might have been near a trade deal. But it appears that a TV ad in Ontario upset Trump – and so the deal was called off.

Why does that still matter? Well, the United States-Mexico-Canada Agreement (USMCA) is up for review in 2026. Can there be a deal if something as minor as a TV spot can upend talks? Heck, maybe Trump will seek separate bilateral deals, which has been his administration’s approach more broadly speaking. And does any uncertainty around USMCA compel companies to invest in the US? Or does the uncertainty keep money on the sidelines?

Also, it’s an election year (again). Trump had a strong hand to play at the start of this year on the heels of an electoral victory and strong poll numbers. What happens next year with midterms on the horizon, control of the House in play, and Trump’s popularity slipping?

There are, however, some trends I’m almost positive we’ll continue to see into 2026. For starters, consolidation at the service center level. I don’t see why the trend would stop next year. Because the reasons driving it – in part to consolidate the sector to better match the consolidation at the mill level – are long standing and don’t hinge on tariff policy or an election year result.

And I’d be surprised if we didn’t continue to see investment in data centers, AI, and energy sector – whether that’s in traditional oil and gas or renewables. Because AI – even if it’s a bubble – isn’t going away and will continue to need more electrons.

It will get brighter (at least the days will)

As for surprises, I think the big one for me to date is this: Section 232 tariffs appear set to end the year at 50% – despite some predictions that they’d be lowered before year end. And Canada, the largest foreign steel supplier to the US market, has backed away from its biggest market in the face of those tariffs. And yet US hot-rolled (HR) coil prices are only a little above $900 per short ton (st).

Don’t get me wrong, that’s a high price compared to the $700s/st we saw at times in Q3 and early Q4. And it’s high compared to the rest of the world. But if you told me last year that we’d have 50% tariffs and Canada largely out of the US market, I would have guessed that HR prices would have been, I don’t know, $1,200/st – if not higher.

Of this much I am certain. I’m writing this column on Dec. 21, the shortest day of the year. It will only get sunnier from here on out. I hope that means not only longer days for us but brighter ones for the steel market too!

In the meantime, thanks to all of you from all of us at SMU for your continued business. We really do appreciate it.