Introduction
In March 2018, U.S. President Donald Trump imposed a 25% tariff on imported steel under Section 232 of the Trade Expansion Act, citing national security concerns. While the move initially caused steel prices to skyrocket, prices eventually declined within a year. We use 2018 & 2019 steel price data from N3C and global steel prices to analyse what caused that to happen in 2018 and what could happen in 2025 moving forward.
The Initial Impact: Steel Prices Surge
Immediately after the tariffs took effect in March 2018, steel prices soared by 30-40%. The price of Hot-Rolled Coil (HRC) steel jumped from approximately $650 per ton to over $900 per ton by mid-2018. The main reasons for this surge included:
- Higher costs for imported steel in U.S. due to the 25% tariff.
- Panic buying among U.S. steel importers to secure supply before tariffs kicked in.
- Global supply reduced because of uncertainty over trade tensions and panic buying.
After the tariffs took effect, steel prices were significantly higher in U.S. and also globally due to panic buying behaviour.
The Subsequent 12 Months: Price Movements
After peaking in mid-2018, steel prices experienced a gradual decline over the next year. Here’s how the price movement unfolded:
- Mid-2018 to Late 2018: Prices remained elevated but started showing signs of weakness as supply increased and demand began to stabilise. U.S. steel mills had ramped up production benefiting from the tariffs, and buyers had stockpiled large amounts of steel, reducing new orders. This caused a mild oversupply from ex-U.S. steel producers.
- Late 2018 to Early 2019: Prices began falling more sharply as supply outpaced demand. The Hot-Rolled Coil (HRC) price dropped below $800 per ton by the end of 2018.
- Early 2019 to Mid-2019: With exemptions granted to key U.S. allies such as Canada, Mexico, and South Korea, more steel entered U.S. market, further reducing prices. By mid-2019, HRC steel prices had declined to around $650 per ton, nearly returning to pre-tariff levels.
- Mid-2019 Onward: Prices stabilized as the effects of the tariffs balanced out with supply adjustments and changing trade dynamics.
The Reversal: Why Steel Prices Fell in 2019
Despite the initial spike, steel prices began to decline by late 2018 and continued dropping into early 2019, eventually falling below $700 per ton. Several key factors contributed to this decline:
1. Increased U.S. Steel Production
The tariffs encouraged domestic steel manufacturers to expand production. With lower competition from foreign steel, U.S. steel mills ramped up output, leading to an oversupply in the global markets.
2. Slowing Demand
Many steel buyers, including manufacturers and construction firms, stockpiled steel in mid-2018, anticipating continued price hikes. This kicked off a global steel panic buying. However, as demand softened in late 2018, prices began to decline due to lower purchasing activity.
3. Exemptions on Tariffs
Initially, the tariffs applied to all steel imports, but later, the Trump administration granted exemptions to key trading partners such as Canada, Mexico, and South Korea. This allowed those trading partners to produce more steels, increasing supply and reducing price pressure.
4. Global Steel Oversupply
Outside the U.S., steel production continued to grow, especially in China and Europe. This resulted in a global oversupply of steel, pushing international prices lower, which eventually influenced U.S. prices as well.
Steel Price Prediction for 2025
As we move forward in 2025, several factors will determine the future trajectory of steel prices:
1. Economic Growth and Infrastructure Spending
- If the U.S. government or other major economies increase infrastructure investments, steel demand could rise, pushing prices higher. For example, when China was building Olympic stadiums, it caused a huge spike in steel demand and price hike.
- However, if economic growth remains slow, demand may not be strong enough to drive significant price increases.
2. Global Supply Chain Stability
- Ongoing geopolitical tensions, supply chain disruptions, or new tariffs could create price volatility.
- China is currently on quantitative easing economic regime which means China is injecting liquidity into its market to stimulate economic activities and growth. China is likely to continue its high steel production levels, global steel oversupply may keep prices in check.
3. U.S. Trade Policies
- If Trump administration removes or modifies tariffs through exemptions like 2018, this could lower U.S. steel prices by increasing imports. Those exempted partners will be able to produce more steels to meet the demand.
- However, if protectionist policies continue, U.S. domestic steel prices could remain elevated relative to global prices. Steel producers outside U.S. will need to seek for buyers from other markets.
- Ultimately, this situation could potentially be beneficial to Malaysia with lower steel prices.
4. Raw Material Costs
- The prices of key steelmaking materials like iron ore and coking coal will influence steel costs.
- If these raw materials become more expensive, steel prices may follow suit.
Conclusion
While Trump’s 2018 tariffs initially led to higher steel prices, the combination of increased U.S. production, slowing demand, and tariff exemptions eventually brought prices back down. Looking ahead to 2025, steel prices are expected to remain relatively stable, though they may fluctuate depending on global economic conditions, supply chain stability, trade policies and other black swan events.
If economic growth and infrastructure spending increase, steel prices could rise. However, if global production remains high and trade barriers ease, steel prices may stay moderate or even decline further. Businesses should closely monitor these factors when planning for future steel procurement and pricing strategies. Historical price data in N3C plays a vital role in helping businesses to carry out these procurement processes and pricing strategies. To access historical price data, sign up N3C Premium at n3c.cidb.gov.my