The American steel industry, which has benefited from artificial intelligence data center construction through demand for steel framing and server racks, is now facing a problem driven by the same boom: soaring electricity costs that executives say are unsustainable. Electric arc furnace steelmakers rely on cheap, stable power to melt scrap metal, and the sudden rise in energy prices in PJM Interconnection’s territory — home to the nation’s largest concentration of such mills — is squeezing operations.
“We as an industry are very reliant on electricity to make steel,” said Rob Simon, chief executive of JSW Steel USA, which operates an electric furnace plant in Mingo Junction, Ohio. “We’ve had stable electricity prices for decades, and now we think that’s at stake.”
Metallus, a specialty steelmaker based in Canton, Ohio, told the Congressional Steel Caucus in testimony last week that its electricity costs have risen approximately 70% since 2024, with annual increases running at about $15 million. “This path is not sustainable,” said Kris Westbrooks, the company’s chief operating officer, in the submitted testimony.
PJM Interconnection, which manages the power grid across 13 states from the Midwest to the mid-Atlantic, reported wholesale power costs in its region rose 76% in the first quarter from a year earlier. The grid operator forecasts that electricity demand in its territory will outpace supply by 6.6 gigawatts beginning in 2027 — the equivalent of about six or seven nuclear power plants. PJM is expected to conduct a supplemental power auction in September after earlier auctions failed to attract enough electricity to meet the region’s needs, with analysts expecting record-high prices.
“Overall, the supply dynamics are incredibly tight,” said Hannah Rogers, a senior associate at business consulting firm Capstone. “As there are more and more data centers, we’re expecting to see a continued increase in the cost.”
Steel industry executives said the expected increases in electricity costs will drive up production costs, but passing those costs to customers is difficult when supply contracts are typically pegged to market prices for steel. “In the steel industry, our margins are so thin we can’t pass along two-times or three-times higher manufacturing costs,” said Brandon Farris, vice president of the Steel Manufacturers Association, a trade group for electric-arc-furnace steelmakers.
The steel association is calling on Congress and the Trump administration to adopt emergency policies to relieve power supply pressure, starting with delaying the retirement of older generating plants. The group said new power plants are not adequately replacing the electricity lost when older plants close, and that permitting for new projects is now running at an average of four and a half years. “We need every kilowatt and every megawatt we can get,” Farris said.
Data centers, meanwhile, continue to consume steel at a rapid rate: about 1 million tons per year, valued at roughly $1.4 billion, according to analysts’ estimates cited in the WSJ report. Construction spending on data centers in April was up 28% over the past year to a seasonally adjusted annual rate of $50.7 billion, according to the Associated Builders and Contractors trade group.
The Energy Department’s Lawrence Berkeley National Laboratory forecast that data centers could use between 9.5% and 15.3% of U.S. electricity by 2030. Steelmakers said that rising demand could force utilities to prioritize data centers — which require uninterrupted power — over steel mills, which can temporarily shut down, making sporadic production outages more likely.