The Section 232 wall is holding
The cornerstone of the US HRC market in 2026 is the Section 232 tariff regime. The 25% tariff on steel imports has created a pricing bubble that shows no signs of popping. Import volumes fell to 1.8 million tonnes in Q2 2026, down 30% from Q2 2025, as the tariff wall effectively priced out foreign suppliers.
The tariff has been a windfall for domestic mills. Nucor, Steel Dynamics, and US Steel are reporting EBITDA margins above 25%, the highest since the post-Covid boom of 2021. Mills have been disciplined in their capacity management, avoiding the price-destructive capacity additions of previous cycles.
But capacity is creeping up
The risk to the current pricing regime is capacity creep. Three new EAF (electric arc furnace) mills have been announced for 2027-2028: Nucor's West Virginia sheet mill, a new entrant in Ohio, and an expansion at Steel Dynamics' Sinton facility. Combined, these represent 6 million tonnes of new capacity in a market that currently consumes 95 million tonnes annually.
Nearer term, existing mills have room to increase utilization. Current utilization at 79.8% can rise to 85% before mills face constraints. A 5% utilization increase would add 4-5 million tonnes of supply, which would pressure prices. Mill discipline is the key variable: if mills maintain order book management, prices stay elevated. If they chase volume, the floor drops.
Demand fundamentals are mixed
Non-residential construction remains the strongest demand segment, driven by semiconductor fabrication plants, battery mega-factories, and data center construction. The CHIPS Act and IRA continue to drive $50 billion+ in steel-intensive construction projects through 2028. Data center construction alone is consuming 2 million tonnes of steel annually, a segment that barely existed in 2020.
The weak spots are residential construction and energy. Housing starts have fallen 8% year-on-year as high interest rates suppress residential building. Oil and gas tubular demand has moderated on the WTI price volatility.
Bull, bear, and base cases
The bull case: tariff protection continues through 2027, non-residential construction accelerates, and mills maintain capacity discipline. HRC pushes to $1,350/ton. The basis for a more protective trade policy environment supports sustained premium pricing.
The bear case: a re-elected administration negotiates tariff reductions with the EU and Japan, import volumes return to 3+ million tonnes/quarter, and new mill capacity arrives faster than expected. HRC falls to $900/ton.
The base case: tariffs remain at 25% through 2026, capacity gradually increases at 2-3 million tonnes/year, and demand from non-residential construction offsets residential weakness. HRC trades $1,050-1,250/ton.
US HRC procurement requires navigating a tariff-protected market. The good news: mill pricing discipline is holding. The bad news: the tariff wall means you pay a $150-200/ton premium over global prices. For structural buyers: lock in 3-month forward contracts at $1,150-1,200/ton. The lead time stretch to 8-10 weeks means spot-only buyers are exposed to mill backlog pricing — if you need steel in 2 weeks, you pay a premium. Consider sourcing from service centers that carry diversified inventory, but expect 3-5% above mill prices. The risk of a price collapse is low as long as tariffs hold. Monitor the Q4 2026 Section 232 review cycle for any signals of policy change.