Several countries are considering stepping up their trade protection measures following the implementation of a unified tariff on all US steel imports, Fitch Ratings says. Rising uncertainty is dampening steel demand expectations, while capex is shifting towards decarbonisation (albeit now at a slower pace among some entities) and value-added products.

The rise in US tariffs on steel in March to a unified 25% on all imports, subsequently increased to 50% in June, has led to a jump in domestic prices, according to Global Investment-Grade Steel — Peer Credit Analysis. We expect most of the price increase to be passed on to end-consumers. The US is a net importer of steel, with 26.2 million tonnes imported in 2024, accounting for 18% of domestic demand. Mexico and Canada supplied almost 40% of total imports. The ramp-up of new capacity ahead of demand growth has reduced import volumes into the US.

We expect trade flows to shift, with high-cost producers becoming unable to compete with lower-cost steelmakers. This will include changes in US import patterns, with higher-cost steel likely to be diverted from the US into less-protected markets such as Latin America and Turkiye.

A number of countries are considering intensifying domestic protection, including the EU’s potential introduction of a ‘melted and poured’ rule (determining the origin of goods by the location of original melting) and levying of additional anti-dumping and safeguard measures in less-protected markets such as India, Turkiye and Brazil, where prices have been under pressure since 2023 due to inflows of Chinese steel.

The European Steel Association has revised its 2025 forecast for apparent steel consumption in the EU to a 0.2% decline, citing uncertainty and major disruptions caused by US tariffs.

European prices have been supported by increased infrastructure and defence spending and will receive further support from 2026 due to full implementation of the EU’s Carbon Border Adjustment Mechanism.

We expect Chinese steel output to fall gradually by 5% in 2025, in line with government policy to control production. This may support the already improving margins of domestic steel producers and reduce pressure from Chinese exports on international markets in the medium term. The direct impact of US tariffs on Chinese steel is minimal as exports to the US account for only around 1% of China’s total steel exports.

Most investment-grade steel producers in China and Europe are focused on enhancing their product portfolios and reducing their carbon footprints, although the shift towards decarbonisation has slowed among some issuers. US producers, including Steel Dynamics and Nucor, are pursuing both value-added portfolio expansion and capacity growth through new mill construction and acquisitions, which should allow them to capture a greater share of the import market.

Most investment-grade steelmakers have low leverage, led by Nucor, Steel Dynamics, Gerdau and Vallourec. US producers have benefited from historically high steel prices and record earnings since 2021. Their balance sheets were already strong before the market upturn, giving them the flexibility to pursue growth and return capital to shareholders.
Source: Fitch Ratings