Demand headwinds blow

The North American ferrous market remained under pressure in 2024 amid lower prices for recycled and finished steel coupled with slower demand, sales and financial losses in the steelmaking segment.

The region’s economies still are sluggish, with lackluster manufacturing growth in the United States and a decline in per-capita gross domestic product (GDP) in Canada. This slowdown directly has affected demand for finished products.

Recovered steel prices in the U.S. and Canada dropped nearly every month last year, with No. 1 busheling delivered to Chicago consumers falling by 25.1 percent from December 2023 to November 2024 to $376 per metric ton ($382/gross ton) from $502/metric ton ($510/gross ton), according to a recent Davis Index pricing benchmark. December’s market had not yet settled as of press time, but the outlook remained gloomy, with decreases of up to $20/gross ton anticipated as the winter holidays approached.

Prices in Ontario fell 22.4 percent to $386/metric ton (CA$487/net ton) delivered to Toronto consumers from $497/metric ton (CA$605/net ton) in December 2023, with sentiment dim as of December of last year.

Meanwhile, the forecast from the Brussels-based World Steel Association for 2024 projects global steel demand will decline by 0.9 percent annually to 1.75 billion metric tons. The group forecasts that the developed world will see steeper declines, with countries like the U.S., Canada and Germany projected to face a 2 percent decline in 2024 from the prior year.

The manufacturing sector experienced a slowdown in activity across 2024, especially in the second half of the year, following growth seen in the first few months. Consumers and companies have become less willing to invest in goods with higher costs, while uncertain business and political conditions and low liquidity have made firms adopt a wait-and-see approach, putting spending decisions on the back burner.

The housing construction sector remained weak in major global markets throughout 2024, reducing steel demand, particularly in China, the U.S., the European Union, Japan and Korea. Housing construction activity slumped in 2023 as central banks raised interest rates to curb inflation, and the slowdown continued in 2024.

Prime scrap grades like busheling and bundles saw more price movement than obsolete grades during that period, with mills turning to heavy melting steel (HMS) Nos. 1 and 2 (80:20). In Detroit, No. 1 busheling fell by 26.4 percent from December 2023 to November 2024, while HMS Nos. 1 and 2 (80:20) saw a smaller decline of 18.2 percent in the same time frame.

Sheet mills, which prefer prime grades, saw lower demand than usual as automotive production faltered, with hot-rolled coil (HRC) prices dropping, especially. Keeping with this trend, at the time of publication, large U.S.-based mills say they will not be purchasing prime grades in abundance during the monthly trading cycles.

HMS has seen some resistance against decreases in prime grades across the U.S. and Canada. But, with the transition toward electric arc furnaces (EAFs) in Canada, this trend could be reversed and Canada could safeguard much of its prime scrap supply within its borders, reducing export.

Dismal performance by steelmakers

Data from the American Iron and Steel Institute (AISI), Washington, indicate a drop in U.S. crude steel production.

From Jan. 1 to Nov. 30, 2024, production decreased by 2.3 percent to 80.51 million net tons (73 million metric tons) from 82.42 million net tons in the same period of 2023. Capacity utilization decreased to 75.8 percent from 76.1 percent in the prior-year period.

Most North American steelmakers reported hits to their bottom lines throughout 2024 given lower average pricing coupled with slow demand and lower production capacities.

Meanwhile, sentiment for finished steel gradually weakened last year as the expected flat-rolled steel market recovery didn’t happen. HRC pricing was weak and, along with discounts by mills, lower order and planned shutdowns and capacity reductions, affected recovered steel procurement across the region. Also, rebar demand was weaker than anticipated last year as the Bipartisan Infrastructure Law’s effect was lackluster.

Threat from cheaper steel imports

North American associations have warned about the continued threat of steel dumping from Asian countries at lower than market value, which is hurting domestic manufacturing as local mills struggle to keep up with imported steel made with deep subsidies and more lax environmental regulations.

Canadian imports have risen despite antidumping measures, with offshore imports doubling over the past decade, according to Canadian Steel Producers Association data. Although Canada has enacted tariffs, China remains its third-largest steel exporter at more than 660,000 net tons last year.

The United States-Canada-Mexico Agreement (USCMA) was formed to facilitate free trade, yet groups have called for more policies to lower unfairly traded imports throughout its block. Canada applied a 25 percent duty on imported Chinese steel and aluminum products in October 2024, following similar moves by the U.S. and Mexico, and U.S. firms are concerned about circumvention via these trading partners.

The X(port) factor

In the meantime, the export market continued to soften. On Dec. 4, 2024, U.S.-origin HMS Nos. 1 and 2 (80:20) decreased to $336.75/metric ton cost and freight Turkey, down 8 by percent from $365.75/mt Nov. 6.

Turkey is the largest importer of recovered steel globally, and a decline in appetite from the Turkish mills does not bode well for top exporters. This slowdown hurt sentiment along the coastal U.S. and Canadian markets during the soft December 2024 trading period, North American sellers observe.

The incoming U.S. and Canadian political administrations could introduce policies that affect steel demand, including protective tariffs and other trade policies, though this is uncertain. Also, economic factors like interest rate cuts could influence growth by raising investment project levels in the second half of the year.

Macroeconomic weaknesses could persist into this year, too, while risks from tariffs and stricter immigration policies could slow U.S. GDP growth from 3 percent to around 2 percent, economists say. All eyes are on this year’s potential outcomes as U.S. President-elect Donald Trump’s administration and upcoming Canadian elections significantly could change the outlook if prudent economic policies are enacted.

Falling auto demand

Automakers in North America faced a rocky 2024 after a month-long U.S. autoworker strike at the tail end of 2023 reduced production and financials.

The auto industry is a major consumer of flat steel products, and any headwind in this sector negatively impacts the entire ferrous sector. Canadian auto industry suppliers say the current outlook for this year is bleak, with little hope for recovery on the horizon.

Weighed down by high interest rates and prices, consumers also are slowing down their vehicle purchases. Rising inventories and a slowdown in electric vehicle sales have pushed light vehicle production guidelines downward. (Read more on the automotive industry outlook.)

Trump tariffs could be a game-changer

Canada currently is the largest steel supplier to the U.S. Data from AISI reveal that from January to October 2024, Canada shipped 5.56 million net tons of steel to the U.S., which was a quarter of all shipments to the U.S. but a 4.3 percent dip from the same year-ago period. Meanwhile, Mexico is the third-largest exporter to the U.S.

Trump has promised to impose 25 percent tariffs on Canadian and Mexican steel upon taking office, and Canada has hit back, vowing retaliatory tariffs in the event Trump makes good on his threat.

Market participants in Canada are mixed about the likelihood of this going forward, with some claiming it is mere posturing from the Trump administration. Yet, some are more certain these tariffs will be set into place, which would harm Canadian steel producers and could create a glut of finished steel in the country.

However, it would be a net positive for U.S. manufacturers, which saw steel prices rise after domestic production strengthened during the implementation of steel tariffs during Trump’s first term.

Sabrina Shaw is a ferrous analyst at Davis Index covering the North American market with a focus on Canada. She can be reached at sabrina.shaw@davisindex.com.