Keep it simple, stupid

Tariffs, Canadian elections and a re-working of trade across the Americas and beyond. I am going to write as objectively as possible, hopefully there is some information that you as the reader can use to help you with your business.

Demand

• Eastern Canada construction markets from least to most active market segments and some comments from wholesale executives. “The hi-rise market is dead”. Which is typically has been a very strong driving force for the demand of all PVF products. With low-rise being weak heading into 25Q2 as well. I believe this reflects over supply, high interest rates and government curtailing of incoming immigration. An idea would be to convert those for sale units into rental units, solving housing shortages in major Canadian cities.
• Commercial and Industrial work is seeing a lot of quotation activity. This would be your hospital or transport system as an example. The industrial sector is currently the largest demand driver, where we see battery plants, nuclear facilities, and data centers in this space. Which demand steel and PVF products.
• “Where before a customer would let 2 people quote on a job, we are seeing every job have 5 people quote on it”.

Inventory and access to inventory is going to be the defining factor in which distribution companies survive these unprecedented times.

Supply

• Coil manufacturing supply has been reduced drastically. As low ordering created a slowdown throughout 24Q3Q4, we are seeing the opposite in 25Q1. Many hot rolled mills are into April-May delivery/rolling, meaning pipe and tube prices will remain high domestically till at least June-July where we may see softening in the hot rolled mills price offering. Tariffs and real input costs like the price of scrap have impacted on these increases. Most North American mills are EAF furnaces.
• “With all these price increases, we usually would be going to town but were just not (buying and taking inventory positions). ” There has been a shift toward keeping an eye on inventory levels, cost cutting, layoffs. The environment, although increasing, is becoming more expensive and is also becoming more uncertain. Which leads well into my general theory of low demand coupled with expensive stuff. An idea that we may become familiar with in 2025.

Policy

• Tariffs have dominated the news cycle, our business strategies and directly impacted on our costs. Tariffs are not going away. This transition period will be hard and chaotic. Having a procurement plan for tariffs should be a priority for any organization buying or selling commodities at this time.
• The Canadian dollar has stayed in the 1.44-1.45 range, this will continue to weaken as tariffs stay and the US stock market goes through a correction. Expect the Loonie to be 1.55-1.58 within the next 60 days.
• Trump port tax on Chinese vessels if implemented will have a profound impact on ocean freight, this is news to watch.

Raw Material & Freight

• North American HRC increases in a very short period on tariff news to US 900-950/ST.
• Scrap prices jump significantly in the month of February on cycle dynamics.
• Price Increase letters across the board on all categories has been sent.
• Ocean Freight lanes from East Asia are down, from the Baltic are flat (for now).

Images

USDCAD 6M. Notice the spike this is when Trump initially announced tariffs on Canada. I expect USDCAD to move into the 1.55-1.58 range within the next 60 days.

Dow Jones Industrial Average, 5 year. I believe US stock market volatility continues into the year. Where we can see some significant downside to the DJI (-25%-50%). This will weaken the loonie tremendously. I put some trend lines that I believe in.

NA HRC 6M. Very fast movement to the upside. Reasons, tariffs, scrap, closed capacity for maintenance.

Hamilton, Canada Scrap Price 6M.

Iron Ore Black Sea, 5Y. I wanted to show the 5 year to portray iron ore can still run up to 400/T easily.

WTI Crude 1Y. Oil has room to go down further, especially if we see more down days on the markets.