Final Thoughts

Final Thoughts
Written by Michael Cowden
January 19, 2025
I don’t pretend to know what President Trump will do in his first days and weeks in office as it relates to steel. The consensus is that whatever “it” is, it will happen quickly.
Take a look at some of the recent coverage we’ve brought you from two Washington, D.C., veterans – trade attorney Lewis Leibowitz and Steel Manufacturers Association (SMA) President Philip Bell.
Leibowitz in his column said to expect fast action on tariffs. That action will probably come via the scores of executive decrees that President-elect Trump could enact shortly after he becomes president on Monday afternoon.
Bell alluded to something similar in regards to tariffs in his Community Chat webinar last week. “I think it’ll be brought up soon, and it wouldn’t surprise me if he mentioned it in the inauguration,” Bell said. (You can view a replay of that webinar here.)
The agreement there is notable. Because Lewis typically takes the view of steel consumers. Bell, in contrast, typically represents the views of domestic mills. More on that in a moment.
Little impact – yet
First, what’s been the impact of tariff threats on prices and demand? In short, not much – or at least that was the case when I was writing this column on Sunday afternoon.
Spot activity for Canadian material, for example, has been put on hold over the last few weeks while the market waits to see what the new tariff landscape might look like.
You would think that might have a big impact on demand. Canada since 2021 has exported approximately 4 million to 4.25 million tons of flat-rolled steel per year to the US, according to government data.
No other country comes close to those levels. And yet prices have changed little since election day – despite all the sabre rattling about tariffs.
Why? Partly because demand remains iffy. It’s also because new capacity – Big River 2, for example – continues to ramp up. SDI Sinton seems to have gotten some if its issues behind it and is now more of a factor in the market. And more established mills are expanding capacity too – North Star BlueScope, for example.
Meanwhile, service center inventories remain high, as our premium subscribers already know. (PS, if you’d like to upgrade from executive to premium, please contact us at info@steelmarketupdate.com.)
What comes next?
“Should tariffs be postponed, the market could see more aggressive downward pressure based on returning spot offerings from North and South of the border,” one industry source said.
But even if tariffs are announced, it’s hard to say what the impact would be. There are “too many unknowns” when it comes to the scope of potential tariffs – not to mention potential retaliation, he said.
In the meantime, “Buyers can source HRC from distributors with immediate delivery for well less than the NUE and CLF published asking prices,” the industry source said.
Just how low? Contract prices are typically based on a discount to spot prices from for a prior month or quarter. Let’s say that discount is 7% on average.
Spot hot-rolled (HR) coil prices averaged $676 per short ton (st) in December. And they averaged $683/st in Q4, according to SMU’s interactive pricing tool. That in theory puts contract pricing at around $630/st.
If mills want to attract big volume spot buys, they’d probably have to offer significant discounts to that. And I don’t see many producers eager to drop pricing to levels that could be uncomfortably close to breakeven.
In other words, I don’t see spot activity picking up unless demand improves. Or unless something big happens with Trump, trade, and tariffs.
Tariff speculation
Which brings us back to tariffs. Looping back to our DC experts, Leibowitz doesn’t think tariffs in Trump’s first term were effective because they put steel consumers at a disadvantage. Bell takes the opposite view – that tariffs encouraged a wave of investment in domestic steelmaking. I see value in both perspectives.
As for what might happen this time, Leibowitz noted that 25% blanket tariffs on Canada and Mexico remained a real possibility.
Bell, however, suggested that such a move would be a last resort. He pointed to the millions of tons of raw materials, semi-finished, and finished steel products regularly moved between the US, Canada, and Mexico.
“I think that it could be a negotiating tactic,” Bell said. “Keep in mind the USMCA has created to me what is the strongest and most powerful trading block in the world. Also, when you look at steel production, there is a lot of cross-border ownership.”
True, that. Just a few examples among the major US steelmakers: Nucor has a galvanizing joint venture with Japanese steelmaker JFE in Mexico. Cleveland-Cliffs owns Canadian steelmaker Stelco. And SDI’s business case for Sinton included exports to Mexico. The company also plans to build a slab casting facility in Mexico to feed its new aluminum rolling mill in Columbus, Miss.
But domestic steelmakers would also like to see more transparency and stricter enforcement around “policy wonkish” stuff like the country of origin of imports into Canada and Mexico. Ditto when it comes to domestic content requirements for goods manufactured in North America, Bell said. (There is also the matter of an alleged export surge from Mexico – something Mexico denies.)
And so “everything has to be on the table” – including the threat of blanket tariffs – to accomplish those goals, Bell said.
I can see that logic. Trump has threatened “shock and awe” in his first 100 days in office on tariffs and other measures. Maybe that’s designed to create fear so that the actual “shock and awe” isn’t necessary. Or maybe that’s just my hope. We’ll know more soon – namely, starting at noon on Monday.
Tampa Steel Conference
Whatever happens in Trump’s first days in office, the Tampa Steel Conference – which SMU hosts along with Port Tampa Bay – will be a great forum to discuss its impact on the steel market.
It will also be a great excuse to get out of the cold and network with a few hundred of your best friends in steel. (Nearly 500 at last count.) So what are you waiting for? You can find out more and register here.

Michael Cowden
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