By Robert England
December 23, 2025
The new year is likely to show a modest pick-up in overall North American automotive production that will, in turn, boost demand for key steel product sectors, such as cold-rolled coil, galvanized sheet and special bar quality steel, according to industry analysts and market participants.
The potential improvement in demand for steel will vary within North America, with a modest gain in the United States, flat demand in Canada and a potential 4% increase in Mexico, according to AutoForecast Solutions in Pottstown, Pennsylvania.
Despite rising optimism in the US that the incoming Donald Trump administration’s policies will jump-start manufacturing and the steel industry, some industry watchers do not expect any immediate significant improvement.
“I don’t think we’re anticipating a material change in production and consumer demand [in the automotive sector],” said Phil Gibbs, metal equity research analyst at KeyBanc Capital Markets, Cleveland, Ohio.
But there are some hopeful signs, according to Gibbs. In late 2024, US dealer inventories stood at about 57 days of supply, approaching the normal level of 60-70 days of supply — sufficiently low to require automakers to produce more cars at a pace in line with consumer demand.
US sales in 2024 were dampened in part because some automakers began the year with high inventory levels.
Stellantis, maker of Chrysler and Jeep vehicles, is among the automakers that have accumulated too much inventory and then gradually cut back production to levels below underlying consumer demand to reduce inventories, according to AutoForecast Solutions.
“Between January and November [2024], Stellantis reduced their [production] plan for the year by over 400,000 units,” Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, told Fastmarkets.
Output at Stellantis is now more in line with actual demand and is likely to add to the overall output of new light vehicles in 2025, Fiorani said.
Stellantis is not the only automaker facing a challenge.
Nissan’s financial woes prompted the company to cut 9,000 jobs in November and reduce production by 20% due to a sales slump in China and the US.
Further, the financial troubles at Nissan “could lead to an eventual closure of a plant or two,” but that has not happened so far, Fiorani said.
The pace of the shift to electric vehicles (EVs) is expected to slow even as they continue to expand their market share but at a slower pace than in the past.
President-elect Trump is expected to curb or eliminate federal tax and policy incentives favoring electric vehicles, but he may be partially thwarted in some of those initiatives by members of Congress with EV battery plants, automakers and parts suppliers in their districts, according to Fiorani.
US buyer sentiment
US consumer demand is likely to tick up slightly in 2025 but remain muted due to affordability challenges, according to Gibbs.
Fewer buyers have the financial resources to pay both high new car prices and high auto loan interest rates of 8-9%, sharply higher than the low-to-no-interest loans prevalent before the 2020 pandemic, Gibbs said.
Expected declines in auto loan interest rates in the new year will only marginally improve buyer sentiment because the decreases are likely to occur very slowly, while new car sales prices will remain high, according to both Fiorani and Gibbs.
In addition, consumers are holding onto their cars longer due to automakers producing better vehicles, which has weakened consumer demand, Gibbs said.
The average age of vehicles on the road hit a record high of 12.6 years in 2024, according to S&P Global Mobility.
US domestic production of light vehicles, a key factor driving domestic steel demand, will hit 10.33 million in 2024 and rise by 1.16% to 10.45 million in 2025, according to AutoForecast Solutions.
US domestic auto production will also be dampened because domestic automakers are not producing enough lower-priced, smaller vehicles that are able to generate a higher number of unit sales, according to Fiorani.
“There is a lack of low-end models — vehicles that are for sale under $30,000,” the auto analyst said.
“There are [such vehicles] available. Chevrolet and Buick offer a couple. Ford has one or two. But there are so few vehicles that are offered in that lower price because [buyers are shifting] to used vehicles at this point for something under $30,000. It’s just easier to go pre-owned than to buy something new,” Fiorani said.
The most recent Cox Automotive Dealer Sentiment Index in December showed an increase in optimism among auto dealers since the November election, with the index rising from 40 in the third quarter to 42 in the fourth quarter but still below 50, the median point on the strong-weak demand scale.
High interest rates and the economy remain the top two negative factors cited as holding back dealer sentiment, the survey found.
Steel remains the essential auto material
US domestic auto production is a big driver of demand for steel overall and a commanding share in some major steel product sectors.
The American Iron and Steel Institute estimates that steel makes up 54% of the materials used in making internal combustion engine light vehicles as well as EVs.
“The big auto exposures are in galvanized and cold-rolled sheet, where the auto sector represents 40% of overall US sheet product [output], and special bar quality steel, where automotive represents 40-50% of the total market,” Gibbs said.
Looking across all steel products, the automotive sector represents about 20-25% of demand, the steel analyst estimated.
“If auto comes back, it should be supportive [of higher steel prices]. You don’t tend to see sheet prices do well for long if auto isn’t participating,” Gibbs said.
Buyers of sheet and SBQ steel told Fastmarkets they are looking to the automotive market to drive demand and push prices higher for those products.
“Obviously we are expecting 2025 to be better than 2024, [and] we are targeting late in the first quarter or early in the second quarter for an uptick,” a Midwest distributor said.
“We are preparing ourselves for an increase in order lines while maintaining strong service levels — so the sooner it comes, the better,” they added.
The Midwest distributor said their inventory is at a 30-year low, and yet the company has still been able to fill 99% of orders from inventory.
“I do think there is some value to be had by investing in inventory [now], but it still carries risk, with interest rates still being elevated,” the distributor said.
A US southern distributor was upbeat about the 2025 outlook for the US SBQ market.
“I think the upside potential is there if Trump does tariff all foreign-made automobiles. As it stands currently, though, I’ve not seen any movement [in SBQ demand]. Lead times are short, and pricing is flat. Overall, our management team is excited to see what 2025 brings,” the southern distributor said.
Tailwinds for automotive steel
Tailwinds seem to be rising for the steel market, with purchasing activity picking up in November after the presidential election and increasing further in December, the Midwest distributor said.
Not surprisingly, US production dominates North American operations, with its estimated 2024 output of 10,330,000 vehicles representing 66.22% of total North American annual production, according to AutoForecast Solutions.
Auto production in Canada, which stood at 1,540,000 units in 2023, declined by a sharp 15.58% in 2024 to 1,300,000 units, while production rose in both the US and Mexico. In 2025, Canada’s production is expected to remain flat at 1,300,000 units.
Mexico’s automotive output is estimated at 3,970,000 units in 2024, the forecaster said, and it is expected to rise by 4.03% to 4,130,000 vehicles in 2025.
The Mexican Automotive Industry Association (AMIA) expects to set a record year for auto production for 2024 and become the fifth-largest global auto producer in 2025, rising from its ranking as the seventh largest in 2023.
The main manufacturers in Mexico are Nissan, General Motors and Volkswagen, automakers that have captured 52.57% of total auto sales in the country, according to AMIA.
Mexico’s success in expanding auto production, in turn, has led Mexico’s steel industry to invest $5.61 billion in expanding steel capacity from 2023 to 2025, according to Mexico’s National Chamber of the Iron and Steel Industry (Canacero).
Brazilian steelmaker Gerdau has been conducting a feasibility study for a new SBQ factory in Mexico to provide steel for automotive parts. The company has estimated that the construction of the 600,000 tonne per year factory will require an initial investment of $500 million-600 million.
Gerdau did not respond to queries about the status of its feasibility review; it is scheduled for completion by the end of 2024, according to chief executive officer Gustavo Werneck.
Mexican steelmaker TYASA (Talleres y Aceros) reported in May that it had begun construction on a SBQ steel rolling mill at its facilities in Orizaba, in the state of Veracruz, with operations set to start up in the third quarter of 2025. The mill will have a production capacity of 400,000 tonnes per year and will produce round bars for the automotive, oil, mining, heavy machinery and construction industries.
The 25% tariff wild card
The extent of any expansion in auto output and steelmaking capacity in Mexico will depend on whether Trump will impose a threatened 25% tariff on Mexican imports if Mexico fails to take steps to stem the flow of illegal migration and illegal drugs across the southern US border.
Mexican President Claudia Sheinbaum has already floated the idea of retaliatory tariffs if Trump’s idea advances. She also pointed out that many US automakers have manufacturing plants in Mexico and that retaliatory tariffs will only raise prices for the average American consumer.
Although Mexican market participants are uncertain about what is going to happen in terms of tariffs next year, some of them reported noticing an increase in the volume of steel products scheduled to be shipped by January 20, the first day when the Trump tariffs could be imposed.
A US northern distributor said that their Mexican sources expect something will happen in Mexico to address the threat of Trump tariffs, “but they are not sure what it will be.”
“They are focusing on getting everything produced and shipped by January 20,” the US northern distributor said. “If they do not think they are going to be able to produce and ship by the 20th, they are allowing customers to cancel their orders or include a clause that the customer assumes the responsibility to pay the 25% tariff if one is imposed after the January 20 deadline.”
A Mexican steel industry observer was optimistic that the tariff threat dispute could be successfully resolved in a timely manner.
“Any imposition of tariffs by the Trump administration should be circumstantial and momentary; they won’t break relations with their backyard,” the industry observer said. “Of course, there will be a breaking point for steel negotiations targeting the automotive sector when they come, but we believe that this will be really circumstantial, and within six months or a year after the start of the administration, there will be a return to the levels we are currently operating at.”
Steel market sources are also cautiously optimistic that Canada may be able to avoid Trump’s threatened 25% tariffs.
“Trump is the ‘art of the deal,’ [and] I think you will see a ton of deals made over the next few years,” a steel buyer said. “I doubt he wants to hurt Canada with tariffs, but that is a big stick that got [Canada’s Prime Minister Justin] Trudeau’s attention. He wants Canada to help with illegal immigration, but he also wants them to stop allowing Chinese finished parts from coming through Canada to the United States,” he said.
A Canadian industry source was optimistic that Canada and the US would be able to avoid the potential US tariffs, although they were alarmed at the potential fallout if an agreement is not reached and tariffs are imposed.
“The 25% tariffs would be disastrous for both economies. There’s so much trade going back and forth. It would be mind-blowing,” the Canadian industry source said.
The Canadian source said that, while Trudeau might hesitate, he is facing stiff political opposition that could bring down his teetering government and bring the opposition Conservative Party to power.
“A new party is poised to take over that is a lot more aligned [with Trump] on those issues,” the Canadian industry source said.
In the end, the three signatory nations to the United States-Mexico-Canada Agreement (USMCA) on trade will resolve the current dispute prompted by Trump’s tariff threat, even though the path to the resolution might be a bumpy one, a trader said.
Gabriela Brumatti in São Paulo and Rijuta Dey in New York contributed to this article.
