US steel contract talks favor sellers for 2027

US flat-rolled steel mills are using the exceedingly constrained supply environment the industry faces as leverage to shape 2027 contract negotiations on more favorable terms.

Mills are looking to optimize contract portfolios for next year by reducing discounts on index-linked deals, capturing full product extras and reducing exposure to customers that struggle to meet obligations or do so inconsistently.

During a recent webinar hosted by Argus, attendee responses to survey questions highlighted the more restrictive, higher-priced environment heading into 2027. The survey found that 56pc of respondents anticipated having less contractual volume next year than in 2026.

The bulk of respondents, 85pc, said they expect discounts on index-linked deals to be 4pc or lower, with a little over half of them looking for discounts of 3-4pc and a third of respondents expecting 1-2pc. Among the limited number of respondents expecting index-linked contract discounts above 4pc, most capped their expectations at 5pc.

This represents a noticeable reduction in discounts associated with index-linked deals compared with historical levels. Mills have historically offered discounts ranging from 6-10pc and, in some cases, even higher.

The discount level is often partially contingent on the monthly tonnage and product mix of the contract. However, the discount level on a dollar-per-short ton (st) basis has continued to widen over the past 12 months as the US market has witnessed steel prices rise to the third-highest level in Argus' history. Tariffs blocking out previously competitive imports and robust domestic demand, mostly from data centers and the energy market, have driven the sustained price appreciation.

The high-price environment is not expected to waver, according to survey respondents. The survey also found that more than 85pc of respondents expected US hot-rolled coil (HRC) prices would be at or above $1,200/st by January 2027. Within this segment, more than half of respondents, 53pc, expected prices to be $1,201-$1,300/st, while 32pc believed prices would be above $1,300/st at the start of next year.

The survey results were collected at the beginning of October, when the US Argus Steel Index HRC price was $1,261.75/st. Price indications from buyers in the following days put prices above that level and encroaching on $1,300/st in some cases.

Still, market participants anticipate that the supply situation could begin to loosen in late first-quarter or second-quarter 2027 and are eyeing this period for a potential price correction that could bring more balance to the supply-and-demand landscape.

By Aaron May