Overseas
June 25, 2015
Analysis of World Export vs. Domestic Hot Rolled Coil Price Spread
Written by Brett Linton
One of the key items Steel Market Update watches is the spread between world hot rolled export pricing and the HRC spot price average here in the United States. This spread is important to the domestic steel mills and their customers because as the spread narrows domestic steel becomes more competitive and their order books are easier to fill. With the second price increase announcement, now totaling $40 per ton, and international export prices falling, the spread between domestic and foreign steel is expected to widen. The exact amount of the change is related to the ability of the steel mills to collect the announced increases as well as to what the foreign steel price offers are for hot rolled coil imported into the U.S.
The following calculation is used by Steel Market Update to identify the spread between world hot rolled export prices as determined by SteelBenchmarker and domestic (US) hot rolled prices determined by SMU. Steel Market Update 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 prices. This is a ‘theoretical’ calculation as freight costs, trader margin and other costs can fluctuate.
