What Is Happening with the Price of Steel?

price of steel

Back in March D+M Metal Products sent out a letter to our customers. This letter discussed changes in the price of steel, specifically increases in the price of steel and how that would affect them and us going forward. Since that time, the Trump administration has announced further tariffs on steel and aluminum. How do these tariffs and domestic production of steel affect the price of the products we manufacture for our customers? What is the outlook on the price of steel moving forward?

Less Domestic Steel Shipped in April, More Imports

On June 11, 2018 The American Iron and Steel Institute (AISI) reported that U.S. steel mills shipped 7,798,326 net tons in April. This was a 6 percent decrease from the tonnage they shipped in March of 2018. All of the following were down 6 percent: cold rolled sheets, hot dipped galvanized sheets and strip, and hot rolled sheets.

Demand for steel remains high, so steel imports were up 12 percent from March. The U.S. imported a total of 3,738,000 net tons (NT) of steel in April 2018, including 2,860,000 net tons (NT) of finished steel. Year-to-date totals on imported steel were also up – 1.1 percent for steel and 2.3 percent for finished steel up over steel imported year to date in 2017.

“Key finished steel products with significant import increases in April compared to March include line pipe (up 87%), heavy structural shapes (up 57%), tin plate (up 53%), reinforcing bars (up 47%), hot rolled bars (up 39%), sheets and strip hot dipped galvanized (up 24%), sheets and strip all other metallic coatings (up 23%), standard pipe (up 20%), cut lengths plates (up 16%), and plates in coils (up 11%). Major products with significant year-to-date (YTD) increases vs. the same period in 2017 include plates in coils (up 43%), hot rolled sheets (up 40%), line pipe (up 31%), oil country goods (up 25%), mechanical tubing (up 23%) and hot rolled bars (up 12%).”

A huge spectrum of American companies need steel to manufacture their products. This steady demand has already lead to higher prices, but the increasingly complicated trade situation with America’s trade partners Mexico, Canada, and the European Union make things even more tangled. The U.S. typically imports about a third of its steel, but that’s unlikely to remain true with the added tariffs Trump has just imposed.

New Tariffs

In March the U.S. Government announced that it would be imposing tariffs on imported steel and aluminum. This caused the price of aluminum to rally. Initially Canada and Mexico were exempt from these tariffs, but as of the end of May, President Trump made it clear that there would no exemptions for Canada, Mexico, or the European Union. U.S. companies will now have to pay 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.

As a result, E.U. Commission Vice President Maros Sefcovic announced that as of July it will begin imposing duties on a list of U.S. products. Canada also announced retaliatory measures. A trade war has begun.

How much tariffs on steel will curb imports is not yet known. Globally, steel prices will likely go down minus U.S. demand (China ramped up its steel production 5 percent in April and exports soared). That’s good news for foreign manufacturers. In the United States, it’s a different story. Already the price of U.S. Midwest domestic hot-rolled coil steel has risen almost 39 percent year to date – good news for American steel mills. For the manufacturer, it’s a different story, though. It costs more for the manufacturer to produce, and the market for his products just contracted considerably.

As of now, there are not enough American steel mills and aluminum smelters producing and competing with each other to drive the price of steel down. How soon this may change is still unknown. It’s also unclear how President Trump’s strategy of hard negotiating with the U.S. trade partners will continue or for how long. All of this means that any industry or company that relies on steel or aluminum will be held hostage to unpredictable pricing for the foreseeable future.

 

 

Scroll to Top
Scroll to Top