Steel production is critically important to U.S. manufacturing, the backbone for many essential industries, and supports many sectors, including construction, automotive, transportation, aerospace, and energy. It’s also a significant demand generator for flatbed and dry van truckload carriers, although spot rates and volumes are way down compared to last year.
According to S&P Platts data, monthly steel production dropped 7.3% month-over-month (m/m) in September and 4.6% year-over-year to the lowest since 2018. In the Great Lakes and South regions, the largest steel producers, September volumes were down 4.7% and 7.3%, respectively. Compared to the 5-year average, steel production tonnage was just over 6% lower.
Indiana is the state that produces the most steel in the U.S. Specifically, the northwestern part of Indiana, around the city of Gary, has the highest concentration of steel production, primarily due to its proximity to the Great Lakes, which facilitates the transportation of raw materials and finished products.
Why Indiana?
Indiana hosts several major steel mills and facilities, including U.S. Steel (the Gary Works), ArcelorMittal (now part of Cleveland-Cliffs), and Nucor. Gary Works is one of North America’s largest integrated steel mills and has been the backbone of U.S. steel production for decades. Indiana’s location along Lake Michigan allows easy transport of iron ore and coal, essential for steelmaking. The Great Lakes also provide a direct route for shipping steel products to other parts of the U.S. and Canada, adding logistical advantages.
Flatbed carriers are seeing 7% fewer truckloads in the Gary freight market than last year, and volumes in nearby South Bend are 16% lower. Outbound spot rates are 1.3% and 2.5% lower, respectively. On the high-volume regional lane from South Bend to Cleveland, volumes are 16% lower, while load volumes west to Minneapolis are 6%, with rates down 3% y/y.
Will new tariffs impact the steel industry?
U.S. steel production has been and could continue to be significantly impacted by tariffs imposed by former President Trump. In 2018, the Trump administration imposed tariffs on imported steel (25%) and aluminum (10%) under Section 232 of the Trade Expansion Act, citing national security concerns. The tariffs initially aimed to protect U.S. steelmakers from cheaper foreign steel, particularly from countries like China, which were accused of “dumping” steel (selling below market price). This protective measure increased demand for domestically produced steel.
In the short term, these tariffs drove up the price of domestic steel, which was a mixed blessing. For U.S. steel producers, higher prices increased profitability and encouraged investment in production capacity. However, for downstream manufacturers (e.g., automakers appliance producers), the cost of raw materials rose significantly, which put pressure on profit margins.
For U.S. manufacturers that use steel in their products, tariffs led to higher input costs, creating challenges for those competing internationally where steel is often cheaper. This impacted the automotive, agriculture, and machinery manufacturing industries, increasing product costs and squeezing profit margins. Tariffs also led to some reciprocal tariffs from trading partners, particularly the European Union and Canada, which retaliated by imposing tariffs on various U.S. goods, complicating the export landscape for U.S. manufacturers.
It remains to be seen if the impact of additional tariffs in 2025 will help the steel industry be more productive or simply increase costs for many U.S. manufacturers. Hopefully, volumes can only go up from where they are now.
