Analysis of World Export vs. Domestic Hot Rolled Coil Prices

The world export price for hot rolled bands is $387 per net ton ($427 per metric ton) FOB the port of export according to data released by SteelBenchmarker earlier this week. This is down $23 from the previous release on May 9th and down $7 per ton compared to the late-April 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 $457 to $487 per ton CIF USA Port.

The latest Steel Market Update hot rolled price average is $630 per ton for domestic steel, up $20 per ton compared to the last time we did an update on world prices and up $100 per ton over our late-April price. The theoretical spread between the world HR export price and the SMU HR price is $143 to $173 per ton ($243 prior to import costs), up $43 from our previous analysis and up $107 from late-April.

The $143 to $173 spread is about $80-85 per ton higher than the average spread we have seen over the last few months. Surpassing last week’s previous high, this is now the highest spread we have seen in our 3+ year history, with the next highest spread being in mid-May 2014 at $84 to $114 per ton ($184 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 $20 to $50 ($120 prior to import costs), and 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. Earlier this week Platts published European HRC prices (Antwerp and Ruhr) at $395 and $399 per net ton respectively ($435 and $440 per metric ton), and Turkey HRC at $404 per net ton ($445 per metric ton). Calculating in $70 to $100 per ton for freight and trader margins, that puts prices around $465-504 per net ton delivered to the US.

However, all the “theoretical” calculations do not mean anything if there is little to no hot rolled coils being offered into the United States. Many foreign mills are not offering or, are offering at numbers much higher than what we have “theoretically” suggested above. This is due to stronger international business, the U.S. market being protected through the use of dumping suits and the desire to collect higher margins when possible.

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.

We have heard of actual offers from Turkey at $560-565 CIF, Duty Paid, US Gulf Port.

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.