Tariffs Are The New Demand

Demand

• US & Canadian wholesalers have come back to the table after the US Election. Increase in orders and quote activity has been noticed.
• Real Estate starts in NE Canada have markedly decreased as we go into 2025 slowdown in the real estate due to higher interests in NA from the Federal Reserve.
• Manufacturing re-shoring efforts from the American and Canadian governments is driving demand. Infrastructure projects from solar farms, new mines and manufacturing continue to pop up for Q1Q2 2025 starts.

Imagine the Loonie going from 1.40 to 1.68 in three months.

Supply

• Most distributors are in end of year inventory throughout the month of November. Lower than normal purchase activity in 24 Q2Q3 in my view would result in trim inventory levels at this time.
• Coils are available with import mills, and mills are ready to make deals to get an order on the books.
• Containers are becoming more available as well.

Political & Market

• The election of Donald Trump has re-energized the steel market. Many believe he will double down on tariffs when in power. Personally, I believe he will increase 232 tariffs potential upward to 50%, including Canada and

Mexico in his basket. It’s hard-to-understand what impact this will have on each NA region (East Canada, East US, South US and West US) however it will definitely allow domestic mills to increase prices once put in place.

• The Canadian dollar continues to lose purchasing power against the US dollar. Spot import offers quoted in $C will continue to increase because of this. Therefore, increased replacement costs. With US stock market corrections to the downside (like in 2008) we have seen the Canadian dollar lose as much as 20% in a very short period time. Imagine the Loonie going from 1.40 to 1.68 in 3 months! Lock in your import orders in $CDN if you can, don’t take the risk on the paying in USD in the future.

• $C power loss will also force Canadian steel mills to book in the US, if they can depending on tariff application in 2025 by the Trump admin.

• Erdogan, Turkey has implemented tariffs on imported steel to Turkey, affecting export sell prices.

• EU has applied tariffs and quotas on all HRC import countries except for Turkey.

Raw Material

• HRC Prices today: NA $800/T – EURO $600/T – CHINA $500/T (FOB MILL).
• Iron ore, scrap and coking coal continue to trend sideways if not at 20-year lows. I cannot see how these input costs can lower in the near-term future. I believe the raw material costs have already baked in loss’ and won't suffer more at this time.
• Increased global conflict increases may also impact supply and availability of said raw materials.

Freight

• Ocean freight has decreased since our last report. Contrary to what we expected to happen. Looking deeper into a bearish viewpoint on ocean freight rates. I can see container rates at this time continue to fall. With asignificant sell-off, US stocks demand for consumer goods will decrease and so will container demand. You will notice from the chart below the FBX Index pre covid floated around $1800/container for a decade ($70/MT). Today the FBX Index is at $3565/container ($140/MT USD). Contract your import orders at a variable freight rate and you can see $70/MT savings at shipment time.