International Steel Prices

Foreign vs Domestic HRC Prices: Imports More Appealing

Written by Brett Linton

Steel Market Update’s latest foreign vs. domestic hot rolled steel price comparison shows that steel imports have become more enticing to U.S. buyers than in previous weeks. U.S producers appear to have lost their price advantage over HRC imports from Far East Asia, according to the latest SMU and CRU price indices. The price differentials between domestic HRC compared to foreign imports had widened through mid-August to reach record highs, but have since declined sharply as steel prices in the U.S. have risen. The latest Far East Asian HRC prices are now $4 cheaper than domestic prices after taking freight costs, trader margins and tariffs into consideration.

The following calculation is used by Steel Market Update to identify the theoretical spread between foreign hot rolled steel prices (delivered to U.S. ports) and domestic hot rolled coil prices (FOB domestic mills). This is only a “theoretical” calculation as freight costs, trader margin and other costs can fluctuate, ultimately influencing the true market spread. We are comparing the SMU U.S. hot rolled weekly index to CRU hot rolled weekly indices for Germany, Italy and Far East Asian ports.

SMU includes a 25 percent import tariff effective on foreign prices after March 23, 2018. We then add $90 per ton to the foreign prices in consideration of freight costs, handling, trader margin, etc., to provide an approximate “CIF U.S. ports price” that can be compared against the SMU U.S. hot rolled price. Note that we do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

Far East Asian HRC (East and Southeast Ports)

As of Wednesday, Nov. 4, the CRU Far East Asian HRC price remained steady over last week at $485 per net ton, $9 higher than the price two weeks ago. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $696 per ton. The latest SMU hot rolled price average is $700 per ton, up $15 over last week and up $25 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $4 per ton more expensive than imported Far East Asian HRC; the price differential has now reversed as domestic prices were cheaper than foreign imports for the past year and a half. In mid-August, domestic HRC held a record high $220 per ton price advantage over Far East Asian HRC.

German HRC

The latest CRU German HRC price is $539 per net ton, up $3 from the previous week and up $11 from two weeks prior. Adding tariffs and import costs, that puts the German price at $764 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $64 per ton cheaper than imported German HRC. U.S. prices have now held this competitive price advantage for two years. In mid-August, domestic HRC held a record high $215 per ton price advantage over German imports.

Italian HRC

CRU published Italian HRC prices at $511 per net ton, down $5 from last week and down $3 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $729 per ton. Accordingly, domestic HRC is theoretically $29 per ton cheaper than imported Italian HRC. U.S. prices have held this price advantage for over a year and a half.  Recall the record high in mid-August when domestic HRC held a $176 per ton price advantage over Italian imports.

The graph below compares all four price indices and highlights the effective date of the tariffs. Foreign prices are referred to as “equalized,” meaning they have been adjusted to include tariffs and importing costs for a like-for-like comparison against the U.S. price.

Note: 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. When considering lead times, a buyer must take into consideration the momentum of pricing both domestically and in the world markets. In most circumstances (but not all), domestic steel will deliver faster than foreign steel ordered on the same day.

Latest in International Steel Prices