Dry bulk assesses US steel tariff increase as negative cargo growth looms

The US has raised tariffs on steel and aluminum imports from 25% to 50%, effective from 4 June, except for the UK, where a 25% rate remains following the recent trade deal.

Howe Robinson Partners head of dry bulk research Bilal Muftuoglu told Riviera that from a seaborne perspective, this tariff increase would primarily impact Supramax shipments from Brazil. Additionally, an indirect effect could be felt on Kamsarmax/Panamax met coal shipments from the US to Brazil if Brazilian steel production declines as a result.

However, data tells a somewhat different story. Citing US steel import figures for April, Mr Muftuoglu noted the decline mainly came from shipments originating in Canada and Mexico. Overall seaborne volumes have not yet dropped significantly, though with the new 50% tariff, further decreases are likely.

These figures suggest that, should the tariffs persist, Canada, Mexico – and to some extent the EU – appear more poised to retaliate compared with Brazil. Mr Muftuoglu highlighted Brazilian steel exports to the US rose by almost 70% year-on-year in May, with a 28% increase for the year to date.

Flat domestic production

US steel production has remained largely flat, indicating a continued reliance on imports. According to Mr Muftuoglu, US steel output totalled 36.3M tonnes in the first five months of this year, compared with 36.5M tonnes in the same period of 2024. “Without a significant ramp-up in production, I find it difficult to see how the US will successfully reduce imports,” he said.

US steel capacity utilisation – how much of total production capacity is being used – remains below 80%. By contrast, during the previous tariff introduction under President Donald Trump, utilisation rates surpassed 80%.

When asked if these numbers suggest tariffs might have a limited impact on trade, Mr Muftuoglu responded that domestic production would need to see a substantial increase first, meaning the tariffs’ effects may not be as significant in the short term.

Negative growth on the horizon

However, the ongoing tariff drama continues to shape market sentiment. BRS Shipbrokers head of dry bulk research Wilson Wirawan noted via social media that ongoing tariff pressures are creating trade uncertainty. A clear sign of this is the contraction of manufacturing activity in key Asian economies such as Vietnam, Taiwan, Indonesia, Japan and South Korea in May.

According to AXSMarine data, global seaborne dry bulk volumes grew by only 0.47% to 0.52% from the start of the year through May. “This is far too little to offset the surge in sub-Capesize vessel deliveries,” Mr Wirawan emphasised, adding, “If trade disruptions continue into the second half of 2025, negative cargo growth by year-end is no longer a far-fetched scenario.”

In a brief comment to Riviera, Mr Wirawan said without the boost from Guinean bauxite benefiting the Capesize segment, and ongoing vessel diversions around the Cape of Good Hope for smaller classes, the Baltic Dry Index would look significantly worse year-to-date.