Analysis of World Export vs. Domestic Hot Rolled Coil Prices

The world export price for hot rolled bands is $394 per net ton ($434 per metric ton) FOB the port of export according to data released by SteelBenchmarker earlier this week. This is up $58 from the previous release on April 11th and up $103 per ton compared to the late-March price.

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 $464 to $494 per ton CIF USA Port.

The latest Steel Market Update hot rolled price average is $530 per ton for domestic steel, up $40 per ton compared to the last time we did an update on world prices and up $90 per ton over our late-March price. The theoretical spread between the world HR export price and the SMU HR price is $36 to $66 per ton ($136 prior to import costs), down $18 from our previous analysis and down $13 from late-March.

The $36 to $66 spread is about $20 per ton lower than the average spread we have seen over the last few months. Our spread back in early February of $63 to $93 per ton was the highest spread seen since late-November 2014 when the spread was $66 to $96 per ton ($166 prior to import costs). In January through May of last year, we had more narrow spreads, some negative (meaning theoretically that domestic steel was cheaper than foreign steel); this time last year, it was -$9 to $21 ($91 prior to import costs). In early February 2015 the spread was -$19 to $11 ($81 prior to import costs),  the lowest seen since late-May 2013. The widest spread seen between foreign and domestic HRC in 2015 was in mid-August at $42 to $72 per ton ($142 prior to import costs).

Steel Market Update has been canvassing the international spot markets to see where hot rolled coil can be bought and delivered to a USA port. First, there are very few offers available and steel buyers are telling us that there are “nibbles” out there at about the same price as the current domestic market ($510-$530 per ton). We have not heard of any takers at that level. The last confirmed level we have heard goes back a couple of weeks when some Turkish HRC was sold for $495 per ton. Therefore, we believe the “real” spread between domestic and foreign hot rolled is less than $30 per ton which is not an attractive price for most domestic steel buyers.

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.