Analysis of World Export vs. Domestic Hot Rolled Coil Price Spread

The world export price for hot rolled bands is $302 per net ton ($333 per metric ton) FOB the port of export according to data released by SteelBenchmarker earlier this week. This is down $6 per ton from the previous release and down $17 from mid-August.

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 the “theoretical” selling price for hot rolled coil exported to the United States as ranging from $372 to $402 per ton CIF USA Port.

The latest Steel Market Update hot rolled price average is $440 per ton for domestic steel, down $10 per ton compared to the last time we did an update on world prices and down $20 per ton over mid-August. The theoretical spread between the world HR export price and the SMU HR price is $38 to $68 per ton ($138 prior to import costs), down $4 from our previous analysis and down $3 from mid-August.

The $38 to $68 spread is $10 to $15 per ton higher than what we have seen over the last few months. Earlier this year we had lower spreads, some negative (meaning domestic steel was cheaper than foreign steel); in early February it was -$19 to $11 and was the lowest seen since late-May 2013. 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 $76 to $106 per ton ($176 prior to import costs).

SMU did some quick market checks and found that hot rolled coil pricing for future delivery to US ports was being quoted at approximately $400 per ton which is at the top end of our spread range. We need to take into consideration that the HRC antidumping suits is going to limit those able to quote hot rolled coil and we expect that there will be artificially higher HRC prices moving forward.

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 a graph comparing 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 view the graph on our website to use it’s interactive features, you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact us at 800-432-3475 or info@SteelMarketUpdate.com.