Final Thoughts: Q4 peak or strong into 2027 (and beyond)?

If you’re on the bullish side, you might emphasize that sheet inventories fell yet again, continuing a trend we’ve seen every month in 2026. You might also note that inventories remain at their lowest point since May 2021, another time when the flat-rolled steel market really boomed.

Meanwhile, long lead times and late deliveries mean service centers are having trouble restocking even if they want to. Put another way, outbound shipments are outpacing intake.

If you’re on the bearish side, you might note that service center shipments slipped or that material on order rose significantly. But I’d be careful about reading decreased shipments as a sign of weaker demand.

I know some service centers have cut back sales in part because they can’t get as much steel as they want. Also, they know tomorrow’s price will be higher than today’s. And so they’re not being shy about charging more and sticking to their guns. To put it another way, I wouldn’t be surprised if we see some companies reporting decreased sales but sharply higher margins as Q2 earnings start to roll out.

Keep an eye on material on order

Personally, I’m watching the material on order figures more closely. Only data providers receive detailed material-on-order data. (If you’re a service center and you’d like to become a data provider, let us know smu@crugroup.com.) So I can’t divulge specific numbers.

But suffice it to say, we haven’t seen this much material on order since October 2023 and the summer of 2021. Both times, we saw prices continue to rise for another two months or so – basically, until that material arrived. And then prices started to drift lower as inventories were brought back to more normal levels. (The difference, though, between 2021 and 2023 and now? More inventory in ’21 and ’23. About 15-20% more.)

The great debate right now seems to be whether prices will inflect in late summer/early fall or whether they’ll continue to rise into 2027. And if you think we’re in for a late Q3/Q4 inflection, elevated material on order is a data point to support your position.

Especially with imports ticking higher

I’d also continue to pay close attention to imports. We’ve seen import volumes creeping higher every month this year. And the 1.90 million metric tons (mt) that arrived in May, according to license data, marks the highest monthly total since 2.03 million mt in July of last year.

Maybe that’s to be expected. US prices continue to tick higher even as prices abroad have slipped. And the divergence could mean a 50% Section 232 tariff isn’t the prohibitively high barrier it used to be.

Anecdotally, as I’ve mentioned before, we’re also hearing that steel buyers along the Great Lakes and inland waterways are buying more imported material than usual.

Import price ranges

It’s hard to pin an exact price on those imports. On the high end, for example, HR from Mexico can be roughly on par with US prices, maybe even at a premium if the lead time is shorter than what’s available from domestic mills. It’s a roughly similar story, our understanding is, for material from Turkey, which can ship to the US East Coast quickly,  

We’re told that HR from South Korea and Brazil is available into the Gulf Coast for the low $1,000s/st. Vietnamese hot band, meanwhile, can be in the high $900s/st. The lower price for Asian material is partly to account for longer time on the water, something exacerbated by delays on the Panama Canal. Basically, material ordered from Vietnam now might not arrive until late fall.

Add inland freight, and none of those prices is exactly cheap. But you might be able to get imported HR at a number close to your contract price, which is a good deal in this market.

Again, more grist for people who think we’ll see a peak this year.

The great debate: Q4 peak or strong into 2027?

That said, if you think the market will peak in the fall, you’re probably not going to go long on imports – which could serve to extend the current cycle.

And anyone who needs steel is not going to get it by saying the market might loosen up after Labor Day. Prices continue to trek higher. That’s assuming you can even get a spot price from a mill in a market where availability remains king and buyers are being held to their contract minimums.

News matters too. And often the rumor comes first. Case in point: We’ve heard that some domestic mills are itching to file a trade petition. And we saw this year how the galvanized market was reshaped by a trade case filed last year. We don’t know what the outcome of contract negotiations with the United Steelworkers (USW) union will be. But we do know that the Sept. 1 deadline is drawing closer.

Finally, and least empirically, our survey results have shown steel buyers rolling their predictions for when the market will peak from one month to the next for most of this year. After a stretch of being mostly wrong with such predictions, it seems we’ve collectively decided that the market won’t peak until two or three months from now. That’s not exactly the most data-driven approach to things.

The ultra bulls

By the way, if we’re going to air some bearish opinions, we should give some airtime to the bulls too. The most bullish theory I’ve heard is that nonresidential construction could come back – and not just data centers. US automotive production could continue to increase, bolstered by reshoring. And maybe energy – with the world more reliant on the US following the Iran war and depleted reserves across the world – could provide a bigger boost to demand. Should the stars align like that, maybe you think a rally into 2028 is possible. Sounds crazy, right? So did a six- to seven-month rally and $1,000+ HR last fall.

Upgrade to premium!

You wouldn’t put low-octane gas into a sports car. And your business is no clunker! Premium data like our service center inventories can move markets. So if you’re an executive subscriber, we humbly suggest you consider upgrading for information like that and other exclusive SMU data. To find out more, ping us at smu@crugroup.com.