As the sun rises in Canada, so does the price of steel.

Raw materials

Since our last report, scrap prices have been steadily increasing, having an immediate impact on flat and long products. North American tubular products have also seen upward price movement due to coil mills announcing increases.

Energy and transport costs have been relatively flat. However, with increased activity in the Gulf between US and Iran, I would caution to say both energy and transport could see very abrupt changes. If a conflict were to start, this would have an impact on domestic and import steel offers, where ocean freight could spike again either due to oil cost or shipping lane closures.

Iron ore as another major cost to steel has seen a run in the last six months, mainly due to seasonal restocking before the Lunar New Year and Chinese sentiment on potential quantitative easing in China, which would lead to more steel production.

A prediction here: if North American and European governments implement export controls on scrap (like China has on steel recently), then we can see scrap move violently. This is something to stay vigilant on. Scrap is the heartbeat and steel is the echo.

Scrap is the heartbeat and steel is the echo.

Mill capacity, output, and import capacity

North American steel mills are publishing a 77% utilization rate, which is up from last year. It's common parlance that NA mills' utilization cap is really 80%. On NA mill activity I have heard mixed signals.

On one hand, I know tariffs in both Canada and the US have been a price controller regionally, allowing NA mills to enjoy the highest premiums on steel products in the world FOB mill in USD terms.

I also know many of our direct customers have integrated domestic steel into their supply chains if they weren't already. Which is a good idea, especially as we hear more policy around buy-American and now buy-Canadian steel projects. If I were a betting man, I would say NA mills are busy at this time.

Within the topic of mill capacity, I want to touch on what I call import capacity.

As an active importer for the eastern Canadian markets, we have quotas in place on most of our catalogued products. Now if we decided to only import amounts that could clear with permits and not be tariffed, from our data, we would be importing 80% less than what our customer base has needed from us per quarter over the last 2 years. We can talk about how demand has fallen, it has, however not by 80%.

Market sentiment

I don't think the Canadian market has accepted the new price floors on steel products. After PM Carney's announcement in December on reducing the quotas in the TRQ system, we saw stock inventories purchased quickly, reminiscent of COVID hoarding buy patterns. Contracts with end users are honored by blending average costs. But when the bins are empty, the replacement costs will be much higher.

Speaking with colleagues and traders, we discussed how the market is not ready to "pull the trigger." "Too many unknowns, too hard to decide."

Big purchases and requirements in 2026 will be made from stock. This I believe may lead to supply issues starting in 26Q3.

Intermetalink and our peers will have the steel products our customers need in stock throughout the year. Make no mistake, we will pay tariffs on those steel products. My message today is clear: don't shy away from indent orders during this transitory price period where mill capacity and import capacity may not be as available as anticipated.