North America Steel 3Q Preview: Supply-Side Support to Extend Cycle, Resulting in Higher FY27, Cooler FY28

Our steel coverage is 9% off August's peak, in-line with XME (-11%), but diverging from HRC's persistent move higher (+7%). What began with the failed Canadian trade deal weighing on the sector's protectionist premium, more recently has turned to rising rates and expectations of near-peak pricing. The majority of US steel demand is exposed to interest rates (50%/25% non-res/auto), and while emerging concerns may be warranted, impacts to actual spend often occur on a 24 month lag and we consider megatrends relatively insulated for now (i.e. AI/DC, border wall, energy infra). Amid near-peak pricing, investors continue to weigh when/how rapidly HRC may correct into FY27, which we feel may be overdone at this stage. Lead times are already extended into 1Q27 and service center shipments outpacing intake from mills running behind have kept inventories lean. This tees up solid supply-side support through at least year-end when also considering seasonal outages, and should translate into stron