Impact of Threatened Trump Steel Tariffs on U.S. Steel Prices and Market Dynamics

U.S. buyers are facing rising steel prices due to proposed tariffs by President Trump. Domestic steel prices have surged to over $900 per ton, exceeding import costs. These changes have challenged both U.S. and Canadian steel producers amid low demand and increased global supply, complicating the market landscape.

The potential steel tariffs proposed by U.S. President Donald Trump are already influencing U.S. buyers, leading to rising domestic steel prices. This week, the benchmark price for domestic steel climbed to over $900 per ton, marking a 25% increase this year due to the upcoming 25% levy on foreign steel imports. Consequently, U.S. prices have now surpassed the cost of imported steel, as noted by industry sources wishing to remain anonymous.

Analyst Timna Tanners from Wolfe Research remarked, “What we’re seeing so far happen is mills capitalize on the tariffs and uncertainty of tariffs, and they’ve been able to raise prices such that at $900 a ton it’s more than what would happen to price with an actual 25% tariff implemented. This isn’t the desired outcome Trump has articulated.” As a result, domestic steel producers have increased their prices significantly.

The steel market is experiencing an influx of shipments from various countries, including Egypt, Algeria, Malaysia, Brazil, and Vietnam. This is occurring despite weak U.S. steel demand attributed to high borrowing costs that deter buyers from moving forward with construction and manufacturing projects. Trump’s recent imposition of a 25% tariff aims to protect domestic producers but has inadvertently led to higher prices.

Some Canadian and Mexican steel producers have responded to these developments by halting new orders. Algoma Steel Group’s Chief Executive Officer, Michael Garcia, mentioned that the company’s order books are under “extreme pressure.” Due to global oversupply, Canadian steelmakers, heavily reliant on U.S. exports, cannot easily shift their sales to other markets.

Catherine Cobden, president of the Canadian Steel Producers Association, emphasized that Canadian steelmakers are likely to pass increased costs onto U.S. customers, rather than divert shipments elsewhere. She stated that the cost of shipping to alternative markets like Europe is prohibitive, making it challenging to navigate an oversupplied global marketplace. Canada’s steel exports to the European Union amount to less than 0.1% of the total output, showing a substantial reliance on U.S. markets.

In conclusion, the anticipated tariffs have led to soaring domestic steel prices, surpassing imported steel costs, and have created a complex landscape for North American steel producers. While the intention of the tariffs was to protect local industries, they appear to have the opposite effect of inflating prices without significantly altering demand dynamics. Both U.S. and certain Canadian producers face a challenging environment amidst ongoing tariffs and market uncertainties.

In summary, the impending steel tariffs proposed by President Trump are significantly increasing domestic steel prices within the United States, resulting in costs exceeding those of imports. The response from domestic producers has been to raise prices amid an influx of foreign steel shipments, despite low demand due to high borrowing costs. Canadian steel producers, facing extreme pressure and reliant on U.S. markets, struggle to adapt to these changing conditions while addressing the ongoing impacts of these protective tariffs.

Original Source: www.thestar.com.my