US steel market participants are entering 2026 with a mix of cautious optimism and lingering concerns about future demand, fueled by the industry's potential overreliance on the data center construction boom.
Buyers and mills routinely cited data center construction as the strongest performing sector for steel consumption in recent months. Some steel buyers said that customers tied to data center construction were already booking out their orders for much of the coming year.
The most recent spending on data center construction was at a seasonally-adjusted annual rate of $41.4bn in August, 26pc higher than August 2024, according to US Census Bureau data.
The expected strength of data center construction activity in 2026 also provided another opportunity for steel demand through energy development. Data center operations are energy intensive, requiring business and local authorities to take an all-encompassing approach for bringing on new sources of power.
Steel mills and buyers highlighted the energy sector as a current and future source of steel demand, even after President Donald Trump's tax and spending reconciliation bill ended green energy subsidies.
Still, there are some caveats to the data center boom, and broader issues with steel demand in the rest of the economy.
Although data center construction has grown year over year, spending growth has slowed from a seasonally adjusted growth of 63pc in the 12 months through August 2024.
Demand, meanwhile, may not grow significantly above 2025 levels in virtually every other sector of steel demand.
Nonresidential construction in August 2025 fell 1.5pc year over year on a seasonally-adjusted annual rate, according to the US Census Bureau. Steel buyers said that most construction besides data centers was in a weak state.
Mills touted the opportunity to capture greater market share in the US auto industry after Section 232 tariffs on steel — which were raised to 50pc by the Trump administration in June — blocked out steel imports from countries like Canada.
Imports of hot-rolled coil (HRC), cold-rolled coil (CRC), and hot-dipped galvanized (HDG) steel totaled 3.3mn metric tonnes (t) year to date through September 2025, a 38pc drop from the 4.9mn t imported during the same time in 2024, according to Census Bureau data. American Iron and Steel Institute data showed year-to-date US steel production of 66.7mn short tons (st) (60.6mn t), through September 2025. It was 2.2pc higher compared with 2024.
The smaller year-to-date growth in domestic production exposes the limits that market share changes alone can produce, and some service centers are concerned that steel demand from outlets like automobile producers may not grow much beyond this market share capture because of strained consumer spending and bearish consumer sentiment.
Retail spending on new vehicles and auto parts was up by 5.1pc in September from a year earlier, according to the Census Bureau, but that growth does not account for changes in price.The number narrows to 2.1pc real growth when factoring in the 3pc annual consumer price index gain reported in September 2025.
Consumers' views on the current and future state of the economy remained poor in December. The University of Michigan's final consumer sentiment survey recorded a mark of 52.9 in December 2025, 29pc lower than the same time a year earlier.
The survey showed eight months in 2025 with a sentiment reading below 60, the highest number of months below that level within the space of one year since 2022. Since 1978, when monthly reports began, only six years posted even a single month with a reading below 60. The next-highest number of months below 60 in one year was four, reported in 2008 and 1980, both years of recession in the US.
Most concerning for consumer-facing industries, the index on future expectations was 54.6, 26pc lower than a year prior.
Automotive and consumer products demand was still more favorable compared to demand in the agricultural industry, where steel is used to manufacture heavy machinery for farming. Global trade uncertainty has made it difficult for farmers to sell their crops overseas, hampering profitability.
This slowdown in the agricultural sector was embodied by companies like John Deere which laid off workers at two Iowa plants in September after reporting higher costs from tariffs, reduced profitability and lowered demand throughout 2025.
One steel buyer said that with so much of the steel industry and wider US economy tied to consumer spending, encompassing everything from food to cars, steel demand would struggle to grow until rising consumer sentiment spurs more spending and a wider economic rebound.
