Steel’s Summer Slump: How Tariffs, Tariffs, and Tariffs (Plus a Little Demand) Bent the Coil
Steel doesn’t bend easily, but markets do. The U.S. Midwest Hot-Rolled Coil (HRC) Steel Future has shed 8% in just three months, a move that speaks volumes about the forces reshaping America’s industrial backbone in 2025.
The Price Floor That Became a Ceiling
In mid-August 2025, HRC futures hover near $835/ton, a stark retreat from the May high of $921.40/ton. Producers like Nucor and Cleveland-Cliffs have drawn a line at $800/ton—ostensibly a “floor”—but the market’s response has been less than enthusiastic. July and August futures trade at $798 and $789/ton, signaling not just caution but a market that expects the softness to linger. Backwardation, once rare in steel, is now the norm.
Tariffs: The Blunt Instrument
The hammer fell in June: President Trump’s administration doubled Section 232 steel tariffs from 25% to 50%. Imports, already on edge, dropped 9.6% in June compared to May. Flat-rolled steel imports—direct competitors to Midwest HRC—plunged 24% month-over-month and nearly 48% year-over-year. The logic was classic protectionism: support domestic steelmakers, curb foreign rivals. But in practice, tariffs are a double-edged sword. While Cleveland-Cliffs and U.S. Steel matched prices at $800/ton, downstream manufacturers and builders faced surging input costs and scrambled to renegotiate contracts. BCG estimates $50 billion in tariff-related costs for 2025 alone, with an extra $1,000–$2,000 tacked onto the price of an American-made vehicle.
A Construction Appetite on a Diet
Steel’s fortunes are welded to America’s construction sector—responsible for 52% of total U.S. steel consumption. But the spring and summer of 2025 saw builder sentiment stuck in neutral. The NAHB Housing Market Index languished at 40 (anything below 50 signals gloom), and housing starts tumbled 11.4% month-over-month in March. Warehouse and retail planning fell double-digits. Only data-center construction—a 23% YoY bright spot—offered a glimmer amid the gray. For steel, these numbers translated to one thing: lower order volumes, longer lead times, and $4.2 billion in stranded inventory at fabricators.
Scrap Gets Cheaper, But So Does Demand
Scrap prices—fuel for the electric arc furnaces (EAFs) that now account for 70% of U.S. steelmaking—fell 7–10% from April to May. In theory, this should have given mills room to cut prices and win business. In reality, it simply mirrored the demand malaise. Mills reported lead times stretched to 14–18 weeks, and half of fabricators cited order cancellations. Even as raw material costs eased, the market’s appetite for new steel was already fading.
Tariff Whiplash and the Global Ripple
Foreign suppliers responded with fire of their own. Retaliatory tariffs from the EU, Canada, China, and Mexico loomed, shrinking U.S. steel’s global addressable market. Meanwhile, Asian and Indian steelmakers pressed ahead with massive new capacity—ASEAN alone is slated to add 104.5 million tons by 2030. The world is awash in steel, and U.S. protectionism, while raising domestic prices, risks isolating American producers from a river of global demand.
Currency: The Silent Undercurrent
Layer on a U.S. dollar that just posted its largest half-year drop since 1973, and the plot thickens. Currency weakness should, in theory, make U.S. steel more competitive abroad. But with tariffs and trade friction dominating headlines, the benefit is blunted. Instead, import costs rise, supply chains are rerouted, and the market grows ever more insular.
Industrial Chess: Who Gains, Who Waits?
Major producers—Nucor, Cleveland-Cliffs, U.S. Steel—have responded with capacity expansions and big bets on EAF technology. But with 77.5% utilization (well below the 80% target) and a 5% contraction in domestic steel demand forecast for H2 2025 into 2026, even the most sophisticated mills are chasing a shrinking pie. Hedge funds are cautious; volatility is up but risk appetite is down. The word “uncertainty” echoed through more than 40 executive calls this quarter.
The Paradox of Protection
The result? A market where price floors are propped up by policy, but the demand that once made those floors lucrative is slipping away. U.S. HRC prices remain 25% above 2024 levels, but the -8% slide in three months is less a blip and more a warning: steel can be protected from the world, but not from gravity.