(Bloomberg) — The rally in European steel prices to eye-watering levels may finally be running out of steam.

A dip in iron ore prices, a seasonal slowdown in demand and an automotive sector hurt by the semiconductor shortage are conspiring to cool benchmark prices of steel on the continent. The price of hot rolled coil futures has tapered off gradually in August after six consecutive months of gains, which gave Europe’s steelmakers some of their biggest profits in years.

Across the Atlantic, the rally continues. Hot rolled coil futures are approaching $2,000 a ton, aided by tariffs on foreign imports that President Joe Biden has been in no rush to lift. If he did, it could energize European prices, while cooling those paid by American consumers.

To be sure, European manufacturers and construction firms shouldn’t get too excited about a rapid reduction in costs. The lull in demand is seasonal, and it could pick up again next month.

“If activity heats up in September then prices should remain firm,” said Christian Georges, senior analyst at Societe Generale SA. “Automotive demand is an on-going uncertainty with the semiconductor shortage but order books are strong.”

Automakers account for some 16% of steel consumption in Europe, according to industry association Eurofer. The sector is suffering from a shortage of semiconductors, which has forced companies from Toyota Motor Corp. to Volkswagen AG to cut or suspend production in recent weeks.

“Vehicle sales in the core European markets are struggling to recover to pre-pandemic levels which is starting to impact steel orders,” said Grant Sporre, a commodities and metals analyst at Bloomberg Intelligence. “At the current steel prices, there was bound to be some pushback from customers.”

(Adds detail on semiconductor shortage in final two paragraphs)

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