11/06/2025
WHAT TO KNOW, IN SUMMARY
Steel construction costs continue to rise, driven by surging aluminum prices from recent tariff hikes, fewer imports, and escalating raw material expenses that have led to higher prices for products like hot rolled beams and merchant bars. The Federal Reserve’s interest rate cut is renewing optimism for construction activity, though labor and material costs may impact the pace of growth. We continue to monitor key movements such as the Cleveland-Cliffs and POSCO strategic partnership and the expansion of Section 232 tariffs, which are tightening steel supply and putting upward pressure on domestic prices. Additionally, strong multifamily housing activity could boost construction demand in high-growth markets sooner than expected.
WHAT’S HAPPENING NOW
Aluminum Price Surge Drives Coating Cost Increases Across Steel Construction
Tariff hikes put in place earlier this year, doubling duties on aluminum imports from 25% to 50%, have triggered a sharp rise in aluminum premiums, now reaching record levels. This escalation is putting significant upward pressure on aluminum-based coating extras used in steel construction applications for corrosion resistance and aesthetic finishes. As a result, steel mill prices for aluminum coatings have climbed over 13% year-over-year, and aluminum mill shapes have surged nearly 23%. These cost increases are impacting project budgets and we expect these higher raw material costs to remain in place across the industry for the foreseeable future. Contractors and developers are advised to reassess material sourcing, lock in pricing early, and explore alternative coatings or domestic suppliers to mitigate the financial impact.
Hot Rolled Beam and Merchant Bar Prices Climb Amid Tariff and Raw Material Pressures
U.S. steel producers, including Nucor and U.S. Steel, have announced successive price increases for hot rolled products, including beams and merchant bars, driven by a combination of rising raw material costs, extended mill lead times, and renewed trade tariffs. Since mid-2024, hot rolled coil prices have surged over 20%, with merchant bar and beam pricing following suit. The reinstatement of Section 232 tariffs, which now covers all steel imports, has significantly reduced imports of these products, giving domestic mills greater pricing power. Additionally, scrap costs have jumped nearly 38% year-over-year, further inflating production expenses. These increases are impacting the steel construction industry by tightening budgets, extending project timelines, and prompting buyers to secure material early to avoid further hikes. While demand remains uneven across regions, mills are signaling that they are going to be firm with pricing, suggesting costs may continue to rise in early 2026.
Interest Rate Cut Signals Renewed Momentum for Steel Construction Projects
The Federal Reserve’s recent decision to cut interest rates by another 0.25 percent has injected optimism into the construction sector, particularly for steel-intensive projects. Lower borrowing costs are expected to ease financing constraints, enabling developers and contractors to move forward with previously delayed or scaled-back initiatives. This shift could lead to increased demand for structural steel products such as beams, columns, and rebar, as more commercial, industrial, and infrastructure projects enter the pipeline. While the full impact will take time to materialize due to long planning and permitting cycles, industry leaders anticipate a gradual uptick in activity throughout the end of 2025 and the start of 2026, which could trigger an imbalance between supply and demand, resulting in rising costs and acute supply shortages. Overall, the rate cut is a positive signal for steel construction, offering a more favorable environment for investment and expansion.
WHAT WE'RE WATCHING
Cleveland-Cliffs Announces Strategic Partnership with POSCO Following U.S.-Korea Trade Agreement
Cleveland-Cliffs Inc. has announced POSCO, Korea’s largest steelmaker, as its strategic partner under a transformative Memorandum of Understanding (MoU) executed in September, coinciding with the new U.S.-Korea trade agreement. This partnership aims to strengthen industrial cooperation between the two nations, allowing POSCO to expand its U.S. customer base and meet trade requirements, while supporting U.S. policy goals for domestic industry and foreign investment. Both companies anticipate significant mutual benefits, with a formal agreement expected by early 2026.
Section 232 Tariffs Tighten Steel Supply and Pricing
The recent expansion of Section 232 tariffs, doubling rates from 25% to 50% on most steel and aluminum imports, has intensified pricing pressure across the steel construction industry. Domestic mills have experienced increased demand, as importers face higher costs and compliance complexity. Industry analysts expect further adjustments, including potential reciprocal tariffs and quota-based exemptions tied to trade negotiations, such as the pending U.S.–UK Economic Prosperity Deal. The Supreme Court conducted oral arguments this week on the constitutionality of the tariffs; however, these proceedings will not likely affect supply or pricing until a final decision is reached. The existing tariffs will remain in place until the court issues its ruling, which is anticipated in mid-2026.
Multifamily Momentum May Accelerate Construction Demand
Traditionally, commercial construction lags residential housing starts by 12–18 months due to longer planning and financing cycles. However, the current surge in multifamily housing—driven by rental demand and affordability challenges—is expected to reshape that timeline. While single-family starts are down amid high mortgage rates, multifamily permits and completions remain strong, especially in urban and high-growth regions. This shift is expected to increase demand for complementary commercial infrastructure, such as retail, parking, and mixed-use developments, sooner than usual. Developers are already seeing signs of accelerated absorption and occupancy, suggesting that commercial projects tied to multifamily hubs may break ground earlier than historical norms. This could mean a potential uptick in commercial activity by mid-2026, especially in markets with dense multifamily pipelines.
LOOKING AHEAD
As we navigate ongoing steel market volatility, including reduced imports and continued inflationary pressures, we remain committed to closely monitoring industry developments and policy changes. Rest assured, we will keep you informed with timely updates to help you anticipate shifts in supply, pricing, and demand. Thank you for your continued trust. We are dedicated to supporting your business as economic factors evolve.
As always, we appreciate you trusting us with your business and look forward to continuing to support you.
