“Steel Is Real”: No Steel Production Means No Military Power, No Industrial Backbone, No Sovereignty

By Stefan Koopman, Senior Macro Strategist at Rabobank

Steel Is Real

“Steel is real” isn’t just a mantra for moustached, espresso-sipping cycling purists who swear by the ride quality of classic steel frames over flashier materials like carbon or titanium. It’s also a hard truth in geopolitics and economics. As we’ve argued over and over: no steel production capacity means no military power, no industrial backbone, no leverage in the great game – and by extension, no sovereignty. Whether you’re building tanks, turbines or yes, even bicycles, steel and other basic industries remain the foundation.

This broader rethink of industrial strategy comes as Europe faces mounting geopolitical pressure. Our latest Monthly Outlook dives deeper into the shifting global landscape, where hybrid warfare, supply chain weaponization, and economic statecraft are rapidly replacing traditional policy tools. From Russian aerial incursions and drone strikes on refineries to the US weaponizing supply chains and swap lines, the lines between markets and military strategy are blurring fast.

Of course, it doesn’t always deliver the right results. Treasury Secretary Bessent told CNBC that substantial financial support for US soybean farmers will be announced Tuesday, lamenting that Beijing has completely stopped buying US soybeans since May, shifting instead to Brazil and (also) US bailed-out Argentina (oops!). The move echoes the $32bn bailout of the sector during Trump’s first term, with fresh tariff revenues earmarked in some sort of money-go-round. In our view, this announcement suggests a near-term breakthrough in US-China agricultural trade should not be expected. For more on the beans and other ag markets, please see our latest ACMR Monthly Outlook.

Brent crude dipped to a 4-month low of USD 64/bbl before recovering to USD 64.80, as OPEC+ signals it may vote this weekend for further supply increases in November. With 2.2m bpd already restored this year and rising output from Brazil and Guyana, oversupply concerns are mounting. China’s strategic stockpiling has so far helped cushion prices, but market sentiment remains bearish for Q4 2025 and into 2026. We agree supply will exceed demand, though not to the extent suggested by consensus. A key source of price support is US production, which is already stalling near 13.4m bpd at current prices. We forecast Brent to average USD 61 in Q1 2025, then USD 58–60 through 2026.

Markets remain largely unfazed by the ongoing US government shutdown, with equities grinding higher, Treasuries stable, and the dollar firming against major peers. Gold briefly hit a record before easing. The prevailing view is that the shutdown has limited macro or monetary policy implications. However, risks are building beneath the surface. President Trump is now openly backing the Project 2025 blueprint and weighing permanent federal job cuts, with budget director Russ Vought pushing for dramatic downsizing. While markets are sanguine – believing this is just part of a game of chicken in US Congress – such cuts could trigger a reflexive process: news of permanent layoffs may dampen consumer confidence and spending, prompting the private sector to retrench further. With job growth already stalling, this feedback loop could accelerate a downturn more quickly than expected.

On that note, the September Challenger report showed hiring intentions at just 117k, down sharply from 403k a year ago. Retailers and transport firms, in particular, appear cautious ahead of the holiday season. At the same time, planned job cuts also declined, pointing to a labor market with low hiring and firing, echoing the JOLTS report and Powell’s recent remarks. Separately, new kid in town, Revelio Labs, reported a 60k increase in employment for September, led by gains in education, health services, and retail trade. Leisure and hospitality, along with business services, saw declines. This contrasts sharply with ADP’s estimate of a 32k drop. Until we hear from the BLS, it’s unclear whether the US added or lost jobs last month – and even then, revisions may leave us guessing for another year. In this labor market, the only certainty is uncertainty.