International Steel Prices

Analysis of World vs. Domestic Hot Rolled Price Spread

Written by Brett Linton


The spread between world hot rolled export pricing and that of the domestic average here in the United States continues to be lower than what we were measuring a couple of months ago. This analysis is based on our review of world export prices and that of hot rolled index from this week. As the spread narrows, the competitiveness of imported steel into the United States is reduced. Over time, if the trend continues, the domestic (U.S. and Canadian) steel mills will be in a better position to regain some of the market share lost to foreign steel imports, especially on flat rolled steel products in the coming months (second half 2015).

The following calculation is used by Steel Market Update in order to identify the spread between world hot rolled export prices as determined by SteelBenchmarker and domestic (US) hot rolled prices determined by SMU. SMU compares the world hot rolled export price to which dollars are added for freight, handling, trader margin, etc. The number generated is then compared to the spot (FOB Mill) domestic hot rolled price using the SMU Hot Rolled Index average for this week, with the result being the spread between domestic and world hot rolled coil (HRC) pricing. This is a “theoretical” calculation as freight costs, trader margin and other costs can fluctuate.

The world export price for hot rolled bands is $382 per net ton ($421 per metric ton) FOB the port of export according to data released by SteelBenchmarker earlier this week. This is down $29 per ton from the previous release in late-February and down $47 per ton from one month ago.

SMU uses a minimum of $70 to as much as $100 per ton for freight, handling, and trader margin, which is then added to the export number in order to get the steel to ports in the United States. This puts our “theoretical” selling price for hot rolled coil exported to the United States as ranging from $452 to $482 per ton CIF USA Port.

In a market price check we are seeing current foreign hot rolled offers as being $460 to $480 per net ton, CIF Duty Paid, the port of Houston.

The latest Steel Market Update hot rolled price average is $480 per ton for domestic steel; this is down $20 from mid-February and down $30 per ton from one month ago. The theoretical spread between the world HR export price and the SMU HR price is -$2 to $28 per ton ($98 prior to import costs), up $9 per ton from our previous analysis and up $17 from one month ago.

In our analysis, a positive price spread indicates foreign HR steel is cheaper than domestic steel, and a negative spread indicates that foreign steel is more expensive than domestic.

Although up over our previous analysis, the -$2 to $28 spread remains low in comparison to previous months. The spread one month ago of -$19 to $11 was the lowest seen since late-May 2013 when we had a spread of -$20 to $10 per ton ($80 prior to import costs). In 2014, the highest spread seen was in mid-May at $84 to $114 per ton ($184 prior to import costs). One year ago the spread was $15 to $45 per ton ($115 prior to import costs).

The above numbers are based on “theoretical” calculations. This is where we believe prices and price offers should be if the SteelBenchmarker world export number is correct.

Freight is an important part of the final determination on whether to import foreign steel or buy from a domestic mill supplier. Domestic prices are referenced as FOB the producing mill while foreign prices are FOB the Port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight, from either a domestic mill or from the port, can dramatically impact the competitiveness of both domestic and foreign steel.

Below is an interactive graph which you can use to compare world HR export prices against the SMU domestic HR average price. We also have included a comparison with freight and traders’ costs added which gives you a better indication of the true price spread. You will need to read this article on our website in order to see and interact with the graphic. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.

{amchart id=”130″ Domestic vs. Foreign Hot Rolled Pricing- Steel Benchmarker World China Europe Prices}

Latest in International Steel Prices