The US steel market is in an unusual state where record production levels are failing to meet buyer needs. Domestic mills are exhibiting strong discipline by limiting contract sales to minimums and virtually eliminating spot availability, creating an artificial scarcity that extends lead times and supports high prices.
US tariffs have successfully choked off foreign competition, with steel imports down nearly 25% year-to-date. This protectionist policy has insulated domestic producers, allowing them to control the market and maintain high prices without the threat of cheaper foreign steel.
While the AI-driven data center buildout is a popular narrative, it currently accounts for only 1-1.5% of US steel demand. The primary drivers remain traditional sectors like automotive and construction, with automotive demand showing a split between resilient high-end markets and struggling economy-class vehicles.
Steel producers are facing rising input costs, particularly a 50% spike in diesel prices since the start of the Iran war. These costs are passed on to customers through surcharges, contributing to the inflationary environment and reinforcing higher steel prices.
The current steel pricing upcycle has lasted nearly nine months, more than double the typical duration. Prices are near $1,100/ton with forecasts of $1,500/ton, and the peak is expected to occur unusually late in the year, suggesting the underlying supply constraints are durable.
Keep pulling the thread on Sam.