They stuck. Now what?

In August I asked if prices are up, do they stick? Well they stuck. US HRC is up 52% in the last 12 months and Nucor has now raised their price 17 weeks in a row, I honestly can’t remember the last time I saw that. The energy spike I called for the fall showed up right on time and the midterms have come and gone. So the question isn’t if the floor holds anymore, its what knocks us off this plateau and when.

Short answer, not much and not soon. Coffee in hand recommended, this one is a bit longer. Happy reading.

Raw materials

Energy is still the whole story. Hormuz has been more or less closed since the war started on February 28th. Brent sat over $100 most of September and October with tankers getting hit every other week. The US started striking again on November 3rd and Brent dropped back under $100 on hopes that now the election is over a deal finally gets done. Trump is talking about “positive momentum”, Iran is saying meet our demands first and the hardliners in Tehran want to keep the strait shut. I have been hearing a deal is close every month since March. I’ll believe it when the tankers move.

Source: EIA monthly Brent spot (Jan–Oct); Nov 9 futures close via worldoilmonitor.com. Nov = futures close on Nov 9 (open circle).

Scrap is the heartbeat and its beating faster. Fastmarkets November survey has US dealers calling for about +7% month on month, and the Turkish mills are back buying deep sea cargoes at higher numbers. And here it is. The scrap export controls I have been talking about since last October are happening. In September the European Commission proposed cutting a bunch of the big scrap buying countries off from EU scrap starting May 2027. The EU is the biggest scrap exporter in the world so this is a big, big deal for Turkey, India and every EAF that eats European scrap. North America will follow, mark my words.

Source: GMK Center monthly scrap reviews; Jun and Aug worked back from reported monthly changes. Early Nov = range of cargo deals, open circle at the midpoint.

Iron ore is the one going the other way. Around $90/t CFR China at the end of October and Dalian futures near four year lows. OK I’ll own this one, I was wrong on China. I called for big output cuts and China is only down about 3% year to date. In my humble opinion it matters alot less then it used to though. North American and Turkish steel is scrap and electricity, not ore and coke.

Source: World Bank Pink Sheet.

Source: Kallanish via IndexBox, IEA, SMM, Kalkine.

Freight is the good news for once. Container rates have been coming down since the summer and transpacific rates are softening with US imports slowing down. If the Red Sea fully opens back up rates could fall off a cliff. Thats the one cost I see going down in the next six months.

The price still doesn't matter, supply does. And supply always comes back to a relationship.

Policy

US: what a summer. July 1st Washington decided not to renew CUSMA so now we are in yearly reviews. Talks with Ottawa blew up on August 21st and the next day the US slapped 50% on about US$20 billion of Canadian goods under Section 338. Steel wasn’t on the list only because its already paying 50% under 232. Word is the US offered to drop steel to 25% during the talks and Canada said no. Two days later Trump threatened 50% on Canadian cars, parts and steel starting January 1st 2027. CUSMA comments are due January 12th. Build the wall, find the holes, patch the holes. Same playbook as always.

Then on November 3rd the Democrats took the House and the Senate. Big wave. But the new Congress doesn’t sit until January and 232 and 338 are the Presidents tools, not Congress’s. They can make noise, they can’t easily take them away. Don’t expect the tariff wall to come down because of the vote. What you can expect is more pressure to end the war and get gas prices down, and that runs through energy which is the part that matters for steel.

Canada: the TRQ is extended to June 27 2027. Same quotas, same 50% surtax over quota. We are in Q2 of year 2 which ends December 29th and Q3 opens December 30th. 27Q1 is already spoken for, even at the import mills for Canada, so if your not booked yet your looking at 27Q2. Some of our US pipe mills can still land goods late 27Q1. Ottawa is also consulting on moving some categories to allocation. Dare I say the word again. That would reward importers with history and make it alot harder for everyone else. Meanwhile our own mills are struggling. Algoma shipped about 145,000 tons in Q3 vs 419,000 a year ago after a power outage in the middle of the EAF switch. Stelco is fighting layoffs and Ottawa gave Cleveland-Cliffs 15 days to reverse them. Make no mistake, domestic supply is thin and alot rides on imports getting in.

Customer markets

USA: the mills are printing money. Nucor made US$1.32 billion in Q3, more than double last year, running at 89%. October had a real shortage of spot flat rolled offers. As of November 6th Kallanish had HRC at $1,340-1,400/st. OCTG is the other hot spot, oil prices have the drillers busy and OCTG averaged around $3,031/t in September, up 17% on the year. Americans still want it close and they want it fast. They are paying for certainty, not price.

Source: Nucor CSP notices via Steel Market Update, SteelOrbis, IndexBox, GMK Center. Weekly hikes since late January; Nov 9 was the 17th straight increase.

Canada: the old inventory is gone. Replacement cost is the price now. The service centres that rode cheap pre-tariff stock through the spring are buying at todays numbers and passing it on. It doesn’t feel like COVID anymore, it feels like fatigue. People have accepted the new level, they just don’t want to be the last guy holding forward tonnage if the war ends. I get it, but I think its the wrong call. The Bank of Canada hiked on October 28th, first time since 2023, and the Loonie is still sitting around 70 cents. Thats not helping anyone landing imports, on top of a 50% surtax.

Source: OFX monthly averages (Jan–Sep), Bank of Canada (Oct), Trading Economics (Nov 12).

Global: worldsteel now has 2026 demand flat. China down about 2%, outside China +1.5% this year and +4% in 2027. The Gulf is expected down around 11% this year because of the war, which frees up capacity in the region for export. One of the reasons our Gulf partners have stayed so competitive.

Source: SteelOrbis, SMM, Kallanish via Eurometal; China price from Mysteel.

What I expect for prices

OK, here comes the tea. This is where I think we go from now through 27Q1. Three scenarios and if I were a betting man, these are my odds.

Stalemate drags on (55%)

• What happens: Hormuz opens slowly in stages, tariffs stay, scrap firm.
• US HRC: flat to +5%, $1,300-1,450/st.
• Canada: +5-10%, domestic mills keep chasing US levels.
• Imported pipe & tube, Eastern Canada: flat in CAD. Cheaper freight and a stronger Loonie cancel out firm FOB. Getting it is the problem, not the price.

It gets worse (25%)

• What happens: talks fail, bombing starts again, Brent back over $110.
• US HRC: +10% or more, allocation at US mills.
• Canada: +10-15%.
• Imported pipe & tube, Eastern Canada: +5-10% on freight and fuel surcharges, longer lead times.

Relief (20%)

• What happens: Hormuz fully open and a Canada-US deal that cuts 232 to 25%.
• US HRC: -10-15% by 27Q2.
• Canada: flat to a bit lower, not back to 2025.
• Imported pipe & tube, Eastern Canada: -5-10%, the 50% surtax is still a hard floor.

Even in the best case nothing goes back to 2025. Peace takes out the energy premium, not the policy premium, and the policy premium is most of the move.