CME HRC futures settled at $1,156/st on July 3, down 0.26 percent on the week, holding in a narrow $1,152-1,159/st range. On the Shanghai Futures Exchange, HRC closed at 3,428 CNY/mt, down 0.32 percent. Chinese export SS400 3mm HRC is priced at approximately $463-470/t FOB Tianjin, creating a record spread of approximately $690/t between US and Chinese HRC prices. This reflects the complete bifurcation of the global steel market between protected Western markets and the surplus-driven Asian market.
The US market is defined by trade policy. Section 232 tariffs on steel were raised to 50 percent in June 2025, sharply limiting import volumes and keeping domestic prices well above global benchmarks. US mills have responded by maximizing capacity utilization — currently running at approximately 80-82 percent of total capacity. However, the operating range is constrained by the limited availability of high-quality scrap (for EAF mills) and the bottleneck of integrated mill production. The result is a US market that is expensive, well-supplied, and isolated from the global surplus. Any domestic mill outage would trigger a sharp near-term price spike.
The Chinese steel market is in a fundamentally different position. Chinese steel demand is in structural decline, driven by the long-term contraction of the real estate sector and the transition toward lower-steel-intensity economic growth. The OECD expects Chinese steel demand to decline appreciably through 2026 and beyond. Meanwhile, approximately 40 million mt of new hot-rolled coil capacity is under construction in China, much of it designed to export surplus production. This creates a persistent downward pressure on export prices, with Chinese mills aggressively seeking markets in Southeast Asia, the Middle East, Africa, and Latin America.
European HRC demand is weak. The construction sector — a major consumer of steel — is subdued across the EU. Restocking cycles have been delayed and need-based, and downstream buyers are wary of holding inventory in a high-cost environment with uncertain demand. European mills face the additional burden of CBAM, which began its levy phase in 2026, adding cost to imported coal-based steel and creating a two-tier market for domestic versus imported material.
Global HRC demand is supported by pockets of strength — infrastructure spending in the US under the Infrastructure Investment and Jobs Act, defense-related procurement in Europe, and energy sector investment in the Middle East. But these are not sufficient to absorb the wave of Chinese exports. The IMARC, S&P Global, and other forecasters expect global HRC prices to shift up only modestly in 2026, with Chinese overcapacity and export pressure capping the upside for unprotected markets.
Bear case: Chinese exports overwhelm global markets as real estate weakness deepens and new capacity comes online. US HRC could still hold above $1,000/st due to tariffs, but unprotected markets would see prices fall below $400/t FOB. Bull case: Strong US infrastructure spending and defense procurement absorb domestic capacity, pushing US HRC toward $1,300/st. Global prices benefit from improved construction demand in India and Southeast Asia. Base case: US HRC remains in a $1,050-1,250/st range under the tariff umbrella. Global prices stay under pressure from Chinese exports, with SS400 HRC at $420-480/t FOB.
The US HRC market is a protected market in the strict sense. The 50 percent Section 232 tariff creates a walled garden where domestic mills can price at import parity plus tariff, currently approximately $1,150-1,200/st depending on the source. For US buyers, the key risk is not the global price level but domestic mill maintenance and capacity utilization. With imports sharply limited, any unplanned outage at a major integrated mill will have an outsized impact on spot prices. The strategic recommendation is to maintain a higher proportion of contract volumes to minimize spot exposure. For non-US buyers, the dynamic is the opposite: Chinese overcapacity and weak global construction demand mean export prices from China and other Asian mills are under persistent downward pressure. Protected markets (US, EU) can separate themselves from this dynamic, but unprotected markets in Southeast Asia, Africa, and the Middle East benefit from readily available low-priced Chinese exports. European buyers face a specific challenge: CBAM costs are layering additional cost onto steel imports, widening the gap between EU-produced and imported steel. Buyers should audit their CBAM exposure now.