COMMODITIES 2025: US HRC faces demand hurdles but could get boost from trade policy

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

End-user demand concerns coupled with new domestic capacity ramp-ups have marred hopes for a significant recovery in US flat steel prices in 2025, traders and analysts told S&P Global Commodity Insights.

However, the market might avoid the worst effects of the demand drop if President-elect Donald Trump follows through on his promises to enactgreater trade protectionism measures.

Commodity Insights analysts forecast the average annual Midwest HRC price in 2025 declining to $748/st, down 3.5% from the estimated 2024 price of $778/st.

"The US HRC pricing outlook continues to clash with weak demand conditions and uncertainties stemming from potential trade policy changes on the horizon," Ali Oktay, lead analyst, said in a November Commodity Briefing Service report. "The spot market remains quiet, with buyers adhering to their contractual volumes; a slight anxiety is brewing among them, however, as some major import options are threatened by these potential changes."

For much of the second half of 2024, US HRC prices seesawed in a relatively narrow band, after declining from $1,100/st in January to a year-to-date low of $645/st EXW in July. Prices were stable in the fourth quarter as service centers managed inventories hand-to-mouth and opted for contractual tons due to discounts that remained favorable to spot offers.

Platts, a part of S&P Global Commodity Insights, assessed US HRC prices at $700/st EXW on Jan. 10, down $400/st year on year. 2024 marked the first Q1 period that did not see a price upswing since 2020, while average prices for the year were at $775.30, down from an average of $920.40 in 2023, according to Commodity Insights data.

Demand outlook for 2025

The trend of moderated price swings and periods of stability are expected to persist into the first half of the 2025, with service centers mostly on the sidelines and reporting inventories as well balanced. Any upside is expected to be capped by faltering demand levels that have struggled to keep up with supply additions, which sources have said is an overall similar picture to what was seen in 2024.

"I doubt demand will be any different than that of last year," said one Midwest service center source, who characterized customer demand levels as steady but not booming.

"Anything energy related will be more positive, but automotive is a mixed bag," a second Midwest service center source said. Automotive sales had slightly improved, while inventories were over supplied, the source said.

According to a source from a third Midwest service center, automotive sales were projected to improve slightly in 2025 from the previous year.

"But the problem is they're sitting on around 101 days of supply," the source said.

In the short term, he added, that is a huge problem for some domestic mills that rely on a significant share of automotive customers.

A trader said that total automotive inventories were down from 101 days. However, despite automotive dealer inventories coming down, they were still "higher than they wanted to be."

North American light vehicle production for Q1 2025 is forecasted to be down 6.4% year on year, while Q2 is expected to bounce back but still be down on the year, according to S&P Global Mobility data.

The trader also pointed to agricultural equipment sector, noting that despite grain prices being pretty poor, there was guidance that a slightly better second half of the year was expected for machinery production rates.

"Not only would you need demand to stabilize and improve, but you would also need tariffs and some sort of supply disruption," the trader said, who cited increasing hot-dipped galvanized capacity over the past few years as well as HRC capacity from US Steel's Big River 2 facility, adding roughly 3 million st of domestic capacity. Adding to supply concerns is Nucor's West Virginia greenfield facility set to bring 3 million st of capacity online in 2026.

Cautious optimism on trade policy

Price recovery in 2025 is largely expected to happen on the back of increased trade protectionism measures anticipated for the incoming Trump administration, which could also temper growing supply concerns for the domestic steel market.

The US Department of Commerce's countervailing duties investigations continue into US imports including HDG steel products from Brazil, Canada, Mexico and Vietnam. US steel companies called for further action beyond a 25% tariff on Mexican imported steel in November, and Trump has said he would implement 60% tariff on Chinese imports as well as 10% on imports from all other countries.

Discussion has continued to evolve among sources over potential disruptions from countries that are key suppliers of semi-finished products to US producers, like Brazil, which has a 3.8 million st annual quota for semi-finished products.

Platts DDP imported HRC similarly traded in a narrow range of prices throughout 2024 and remained largely uncompetitive with domestic prices for much of the year. The daily Platts HRC DDP Houston was assessed at $640/st on Jan. 10, unchanged on the day and on the month.

One southern-based service center source said he was unable to get any quotes out of Mexico or South Korea as many offshore suppliers were keeping things on hold while awaiting a clearer signal of potential tariffs.

While the trade outlook is expected to support domestic flat-steel prices, steel market participants remain uncertain about additional domestic capacity and end-user demand. Many are looking to Trump's Jan. 20 inauguration as a bellwether for what is to come for 2025.