How consolidation and tariffs are reshaping the steel supply chain

Fabricators and manufacturers feel supply chain changes acutely. Best case scenarios result in stronger relationships, better service, more or wider product options and availability, and greater flexibility in financing and inventory management. Sometimes, what results in optimization for the steel industry can be challenging for its customers, but like all changes, transitions often feel awkward before they feel smooth.

So far, 2026 is trending towards even more upheaval to the steel supply chain. Last fall, metals processor and distributor Ryerson and large-scale service center Olympic Steel announced their merger. It’s no secret that a solid relationship between a fabrication shop and a service center is advantageous for both. The right dynamic can help each get by in lean times and thrive in prime times. When two large organizations combine, it leaves smaller customers scratching their heads about whether their business will get the attention it needs.

Historically, service centers have been instrumental in giving customers access to limited supplies. When mills have extended lead times, customers have been able to lean on their well-stocked, go-to service center partners for immediate access, purchasing mixed loads, partial bundles, custom cuts and lengths, specialty grades, and rush orders.

Service centers with excess inventory help soften market volatility for customers. If mill prices increase, service centers can bump prices up on steel stock, selling it more profitably but without a sudden spike to end customers. They also don’t crash prices when mills issue price decreases, giving customers time to manage their quotes, project expenses, and standing contracts.

Some fabricators rely on their service center partners for their expertise. When a product is unavailable or out of budget, strong partners help them source or make grade substitutions. They let their customers know when mills are going to be out and how to time their orders.

Mills primarily servicing large customers (like the auto industry) aren’t necessarily able to extend the financing options that a service center can provide for its fabricator customers, like extended terms, inventory programs, or occasionally even consignment stock opportunities.

In the case of the Ryerson and Olympic merger, the companies stated that the value of their collaboration for customers is in their enhanced capabilities from complimentary areas of expertise.

“The combination of our organizations will further scale the digital investments that Ryerson has made to bring Olympic Steel’s capabilities and formidable expertise into a larger network and provide our customers with greater network density, faster lead times, and a wider array of custom solutions from pick-pack-and-ship to finished parts,” said the merger announcement.

On Jan. 5, Russel Metals completed its acquisition of seven U.S.-based Kloeckner service centers. These operations specialize in U.S. metals distribution, supplying steel and nonferrous products and providing value‑added processing and logistics. The deal expands Russel Metals’ geographic footprint, integrating supply and inventory options. Specific to this deal, customers can find more value-added processing options, more flexibility in inventory planning and management (like JIT options), and ongoing investments that make facilities efficient for buyers.

Worthington Steel has confirmed it is having discussions about acquiring Klöckner & Co. SE, Düsseldorf, Germany. Worthington, a metal processor, currently operates 37 facilities in seven states and 10 countries.

What Does the President Think?

When steel producers merge or are acquired, the implications to end-market users, like fabricators and manufacturers, can be tempered by their service center partners. Such might have been the case had U. S. Steel changed its strategic focus and idled its Granite City works facility.

News of U. S. Steel’s acquisition by Japan’s Nippon Steel was widespread even outside steel-adjacent industries. With the news came fears about implications to the domestic steel market. Since the acquisition, U. S. Steel found its strategic plans transformed by the intervention of President Donald Trump, who holds “the golden share.” The share arrangement was a critical condition of the sale being allowed to proceed. The deal had previously been blocked by Biden before Trump’s election.

The golden share allows the president extraordinary veto powers and oversight powers on key corporate decisions. Trump exercised this veto power when in October U. S. Steel announced its plan to end Granite City operations in November. By December, the company announced it was restarting Blast Furnace B at Granite City, a facility with an annual raw steelmaking capacity of 2.8 million net tons.

Obviously, not every steel supply chain decision is subject to the unique control of the sitting U.S. president. However, the decision to place 50% tariffs on steel imported to the U.S. was a steel supply chain decision orchestrated by the president.

Let’s Not Forget Tariffs

Section 232 tariffs at a rate of 50% went into effect on June 4, 2025. The president maintains that the rate is always subject to negotiation if countries are willing to come to the table with deals that are advantageous to broader U.S. national interests. The profitability of some steel derivative products was so nominal that much of the product development was outsourced. As a result, buyers were suddenly hit with exponential price increases on products they couldn’t get domestically.

In the hope that negotiations would bring rates down, many service centers initially tried to absorb tariff costs for buyers. However, the only carve-out that materialized before the end of 2025 was a 25% tariff rate for steel imported from the U.K. Tariff expenses had to be passed to end buyers.

The demand for steel products that were once sourced both domestically and internationally suddenly shifted back to domestic producers. Steel product prices have increased as the lack of imports has curbed foreign supplies. Less competition for domestic producers means fewer steel supplies for buyers who are in competition with one another for attaining the same materials.

Service centers are then forced to limit deals for customers. Since they no longer need to move aggressively to unload inventory, they can afford to sit on it longer and wait for prices to increase. Buyers find less relief as service centers can afford to maintain margins. For buyers, prices can rise fast, fall more slowly, and become harder to negotiate.

Tariffs amplify the situation. Supply chain consolidation, without imports as competition, means that mills could become gatekeepers for service centers, and service centers can become gatekeepers for buyers. Buyer leverage continues to weaken.

Recent supply chain transformations have moved pricing power upstream, and consolidation does not appear to be slowing down. Steel Dynamics and Australian conglomerate SGH Ltd. have formed a nonbinding takeover proposal of BlueScope, one of Australia’s largest steel producers. The proposal includes North Star BlueScope Steel in Ohio, which recently expanded its capacity from 2 million to 3 million tons per year. So far, the BlueScope board has rejected the proposed deal.

In a market riddled with uncertainty, it’s nearly a sure bet to expect the steel supply chain to continue shifting in the days to come.