US hot-rolled coil (HRC) markets could face their biggest challenge in nearly 10 months in an otherwise steady march, as media reports suggest that a potential trade deal between the US and Canada could result in the halving of US import tariffs on the latter country.
The latest Argus steel index US HRC price hit its highest level in more than four years, eclipsing $1,200/short ton (st) in a price cycle for just the third time in its history. The jump in the 18 August price came ahead of news reports on 19 August of a potential reduction in steel tariffs levied on Canada from 50pc to 25pc.
Although details of the deal have yet to be finalized, the US market has been attempting to digest the news of potentially having its largest steel trading partner available again as a supplier.
US HRC futures faced a steep selloff on the CME after fourth-quarter prices reached a fresh peak at the start of the week. The October forward contract settled at $1,175/st on 20 August, falling by $50/st from the prior day. November and December contracts were down even more, dropping by $58/st and $56/st to $1,150/st and $1,131/st, respectively.
US mills have struggled to provide sufficient spot availability to meet buyers' demand needs for months because of a combination of increased annual contract commitments after the displacement of Canada and Mexico, and production outages from either planned or unplanned maintenance.
Even as the forward curve dropped, the physical market continued to mull over what exactly the ramifications of lower tariffs on Canada would mean for pricing and annual contract negotiations set to begin in the next 30 days.
Canada averaged 3.8mn metric tonnes (t)/yr of flat-rolled exports to the US between 2021-2024, with that total dropping to 2.5mn t in 2025 and to just 812,343t for the year to date in 2026, including preliminary license data for July and August, according to US Department of Commerce data.
Market sources indicated Canadian supply would be able to return if tariffs were lowered to 25pc, but the speed of the return and the amount of supply were the biggest questions.
Some sources noted returning Canadian supply could serve more as a pressure release valve than something that would cause a sharp correction to domestic prices. Service centers have reported having to turn down customer orders because of the unavailability of domestic spot supply. In addition, there has been growing interest and commitments to the import market for deliveries for the fourth quarter of 2026 and into the first quarter of 2027 to meet demand needs.
Additional Canadian supply could help service centers meet demand needs while also presenting an opportunity for domestic mills to get caught up on order backlogs that have caused less consistent delivery performance throughout the year.
