US tariffs inflate steel prices, complicating Posco's American ambitions

The Trump administration's steel tariff hikes are piling pressure on Posco, which has been pursuing a partnership with a US steelmaker. Rising domestic steel prices in the United States are delaying cooperation talks while also dampening the Korean company's exports to the American market.

Negotiations between Posco and US steelmaker Cleveland-Cliffs have dragged on well past their original timeline, according to the steel industry. When the two companies signed an MOU last year, they had aimed to announce a formal cooperation plan by the first quarter and complete a deal this year. But as US steel prices have climbed, Cliffs has gained leverage, and the two sides are increasingly at odds over the structure of any partnership.

The original concept called for the two companies to collaborate by combining Posco's advanced steel technology with Cliffs' domestic production base. Cliffs — North America's largest flat-rolled steel producer — sought access to Posco's high-grade steelmaking expertise, while Posco aimed to use Cliffs' US facilities to reduce its exposure to tariff barriers.

The mood in the negotiations has shifted, however, as tariff-driven price increases and a recovery in US automotive demand have strengthened Cliffs' hand. Hot-rolled coil prices in the United States currently stand at $1,100 per short ton, up 18.9 percent from the start of the year and 22.2 percent from the same period last year, according to the steel industry. With its order backlog and selling prices both improving, Cliffs has signaled it sees no urgency in closing a deal.

Cliffs CEO Lourenco Goncalves said on the company's first-quarter earnings call that "the recent improvement in steel prices and the recovery in US automotive demand have improved our situation," adding that "our perspective on this transaction has changed accordingly."

Posco had planned to use a partnership with Cliffs to gain a quick foothold in the US automotive steel sheet market, then build a long-term local supply chain by leveraging an electric arc furnace steel mill it plans to bring into mass production in Louisiana in 2029. With the Cliffs cooperation now stalled, Posco's roadmap for the high-margin US market has hit a significant snag.

Tariffs have also made the export environment difficult. South Korea's steel product exports to the United States from January through May rose about 20 percent year-on-year, according to the Korea International Trade Association. The gains, however, were driven largely by wire rods, bar steel, rebar and structural steel — products that Posco either does not make or treats as secondary lines.

Exports of wire rods and bar steel reached $252 million, 7.5 times the year-earlier figure, while structural steel exports came to $110 million, roughly triple the prior-year level. Steel plates — Posco's primary export category — were flat year-on-year at $542 million.

Meanwhile, Posco is pursuing a plan to build crude steel capacity of 10 million tons in overseas markets by 2031. In India, the company is partnering with JSW Steel, the country's top steelmaker, to build an integrated steel mill in the state of Odisha. In Louisiana, it is working with Hyundai Steel to construct an electric arc furnace steel mill.

"Not just Posco but global steelmakers are all racing to localize," an industry official said. "The tug-of-war between companies to gain the upper hand in negotiations appears to be intensifying."