Leonard spoke during the “Automotive and Construction Demand Outlook” panel at Fastmarkets’ Circular Steel Summit 2026 on Wednesday January 28 in Houston, Texas, offering a forward-looking assessment of the main demand drivers for steel.
Steel production and prices
Section 232 tariffs have supported US steel production, which increased through 2025 even amid subdued end-market demand, Leonard said, adding that this has come at the expense of output in other developed regions, particularly Europe.
Looking ahead, the firm expects US steel production growth to remain positive but muted, reflecting sluggish automotive demand and only selective strength in construction.
Steel prices have risen following recent tariff measures, but not to the same extent seen after the initial Section 232 tariffs in 2018. Leonard attributed this to weaker underlying demand conditions and greater cost absorption within supply chains.
“Compared with previous cycles, the demand environment today is fundamentally different,” Leonard said, adding that steel prices are expected to edge higher, but without sharp upside.
Automotive: Demand resilient but structurally constrained
Oxford Economics maintains a relatively bullish outlook for the US economy overall, with gross domestic product growth expected to outpace most other developed economies. But Leonard cautioned that this strength is narrowly concentrated in areas such as data centers and artificial intelligence (AI), rather than broad-based consumer demand.
In the automotive sector, fears that tariffs and inflation would significantly curb vehicle demand have not materialized so far. Leonard said that higher costs linked to tariffs have largely been absorbed by automakers and overseas suppliers, limiting the impact on final vehicle prices.
Oxford Economics estimates that roughly $20 billion in costs have been absorbed upstream in automotive supply chains, supporting demand in the short term. But Leonard warned that this dynamic is unsustainable and said price pressures could intensify if tariffs persist.
Automotive demand remains constrained by high financing costs, which have not fallen meaningfully despite a stabilization in the Federal Reserve’s policy rate. Vehicle affordability remains weaker than pre-pandemic levels, particularly as electric vehicle (EV) tax credits expire and interest costs stay elevated.
Looking ahead, Oxford Economics’ forecast for US automotive production through 2027 is flat, with total output growth of around 1% — well below historical norms. Any incremental growth is expected to come primarily from hybrid and electric vehicles.
Leonard highlighted that EVs, while lighter in steel share, actually contain more steel per unit on a weight basis due to heavier battery systems, creating limited but positive tailwinds for steel demand.
Construction: Cost pressures and uneven growth
Construction remains the largest single source of steel demand, accounting for roughly half of total consumption, Leonard said. But the outlook is mixed and uneven across segments.
Effective tariff rates on building materials remain elevated due to Section 232 tariffs on steel and additional duties on lumber imports, particularly from Canada. These material cost pressures, combined with persistent labor shortages, continue to weigh on project viability.
Structural labor tightness in construction has been exacerbated by demographic trends and immigration enforcement, Leonard said, further pushing up project costs and limiting new starts.
While residential construction is expected to recover modestly as long-term interest rates ease, growth is concentrated in less steel-intensive segments, such as single-family housing. High-rise residential construction — a more steel-intensive segment — is not expected to see meaningful growth, Leonard said.
Non-residential construction presents a more complex picture. Manufacturing-related construction surged following policy support such as the CHIPS and Science Act, driving strong steel demand in recent years. Meanwhile, traditional office construction remains structurally weak.
Leonard said that growth in commercial construction is now being driven almost entirely by data centers linked to AI and cloud computing. These projects are classified as office construction but differ significantly in structure and steel usage.
Energy and infrastructure support steel demand
The expansion of data centers is also driving strong demand for power generation and grid infrastructure, creating indirect but meaningful steel demand. Oxford Economics expects substantial investment in power generation capacity toward the end of the decade, although permitting constraints will slow deployment.
Transport infrastructure is another source of growth, supported by government spending programs.
At a regional level, Oxford Economics sees non-residential construction growth concentrated in states such as Pennsylvania, Nebraska and Louisiana, with other pockets of growth across the western US.
