US Steel Costs Impacted by War, Trade Deals

Asks about the state of the steel industry and what is dominating thematically at the Industrials and Basic Materials conference.

Tim

Sam McKinney

Data centers and the Iran war are top of mind. Focus is on pricing in a strange supply-demand backdrop.

Leadership teams of 100+ companies and 400-500 investors are gathered.

Asks whether the AI boom creates a multi-year structural tailwind for steel via data center construction, or if it's just market enthusiasm.

Alex

Sam McKinney

Data center construction requires steel, but at ~1 million tons vs 90 million tons US production, it's only ~1.1% of demand. Not yet a big driver.

80 million sq ft of data center construction expected this year; each 1 million sq ft requires ~14,000 tons of steel.

Asks if data center demand could become a bigger driver in the future.

Tim

Sam McKinney

Data center demand may grow but currently only ~1.5% of US steel market. Main demand drivers are automotive, service centers, and construction.

Not a data center expert, but expects more construction next year.

Sam McKinney

The steel market is more supply-driven than demand-driven. US production is up 8% YTD, highest weekly since March 2020, yet buyers can't get steel.

Mills are holding customers to minimum tonnage ranges, pushing out lead times and strengthening pricing.

Asks if the resilience is due to favorable supply-demand dynamics or improving fundamentals.

Alex

Sam McKinney

Supply-demand dynamics are key. Mills are disciplined, holding customers to minimum contract tons. Spot market is essentially unavailable.

US Steel's Granite City furnace booked out through end of July immediately after restart.

Asks about tariffs' effect on the US steel industry and imports.

Tim

Sam McKinney

Section 232 tariffs raised to 50% have reduced imports 25% YTD. Imports down 10-15% last year. Tariffs keep foreign supply out, benefiting domestic mills.

Imports have been a big watch point since tariff increase almost a year ago.

Asks about the difference between imported and US-made steel.

Tim

Sam McKinney

Administration and domestic mills emphasize protection of American jobs and national security. From buyer perspective, domestic lead time is 7 weeks vs 3 months for imports, making domestic more attractive despite higher price.

Availability trumps price for buyers currently.

Asks about rising electricity prices from data center demand and their effect on steel producers.

Tim

Sam McKinney

Steel mills hedge electricity costs or have long-term fixed contracts. More important is diesel: up 50% since Iran war start, passed to customers as surcharge, keeping prices high.

Steel stocks can act as inflation hedges. Inflation not returning to 2% anytime soon.

Asks if retail is still aggressively trading metals markets.

Alex

Sam McKinney

Cannot speak to retail activity; their firm deals with institutions, not retail investors.

Asks about the auto industry's steel supply chain, noting Ford suffered from a steel facility outage in New York.

Mentions upcoming Ferrari EV discussion.

Tim

Sam McKinney

Major steel suppliers to automotive: Cleveland-Cliffs, Steel Dynamics in Midwest, Nucor in South (building new WV mill). Steel goes through service centers for value-added work before reaching OEMs.

Automotive market is a dichotomy: medium/heavy trucks and premium vehicles still have demand, but affordability and interest rates weigh on economy class vehicles.

Asks about takeaways from the strong earnings season for metals and basic materials companies.

Alex

Sam McKinney

Steel pricing upcycle is unusually long at 9 months vs typical 3-4 months. Prices near $1,100/ton, could reach $1,500. Peak expected in August or September, later than usual.

Normally peaks late spring/early summer. Extended cycle because no one is dumping tons or undercutting pricing.

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